The cost of a bond depends on the type of bond as well as other factors such as the size of bond and strength of the organization. For contract bonds, the cost is usually between 0.5% and 3% of the contract price.
What does a Bond Company look for?
Bond companies are interested in the Three “C’s” - character, capacity and credit. However, each surety company uses a different formula that values different traits slightly different. These traits include:
- A good track record of completing jobs on schedule and within budget
- Has the experience that matches the requirements of the contract
- Has or can obtain the necessary equipment needed to perform the work
- The surety also wants to make certain the contractor has the financial strength to support the desired work program and has a history of paying subcontractors and suppliers promptly.
- The surety wants to see that the contractor is in good standing with a bank
- Established a line of credit