What is Bond Rate?
One of the questions that we consistently get is what is the rate of the bond? That is, what does the bond cost? Although it is nearly impossible in this short bond post to give you an exact cost for your cost, we can give you some great outlines on the bond rate.
If the contract underlying the bond is $400,000 or less, then a good rule of thumb is 3%. If the cost of the bond is greater than that, we try and use a sliding scale so that the cost reduces down to 1% at $1.5 million. There are a couple of caveats to this. First, this assumes that your company meets the requirements of a preferred vendor. We recently had a great client that didn't meet this and ended up with the 3% rate for the bond (which was slightly less than $1 million).
This brings us to a great point. Once you start getting bonded, we like to have the company underwritten and pre-approved for a better bond rate. This allows your company to get better rates in the future as well.
I hope that this helps just a bit about the cost rate of a surety bond for you and your company.