As a small business owner, you likely deal with frustrating situations daily. One of those frustrating situations could have been when a hired consultant or company isn’t completing the work you agreed to at the beginning of the project. Hopefully, it means you have a simple conversation to voice that frustration to find a solution that works for your business and the consultant you hired. On the same note, if you’re a small business providing clients services that require surety bonds, you can understand why those clients are looking for the security that a surety bond brings. Depending on the job and the employer, you may be required to get a surety bond for a project. But how can a surety bond help you successfully cross the project finish line? We’ve got the breakdown.
What exactly is a surety bond?
A surety bond is a legally-binding agreement held between parties ensuring the obligations of a paid project are fulfilled. For example, suppose the hired party does not complete the outlined project entirely and correctly. In that case, the hiring company can file a claim for the bond amount, and the hired party would be responsible for the payment of the bond back to the institution that funded it. To put it very simply, a surety bond for a project is similar to a bail bond for an individual who has recently been out of jail. A surety bond keeps everything in balance and protects each party involved.
How Surety Bonds work:
Three parties are involved in a surety bond: 1) the principal, 2) the obligee, and 3) the surety.
The principal is the business that purchases the bond to guarantee the quality and completion of the work the obligee hired them to do. The obligee is the organization that asks the principal to buy a bond. The surety is the organization that gives out the bond and financially guarantees the principal’s ability to complete their work.
How much do surety bonds cost for principals?
It all depends on several factors. It can depend on the bond type and whether you need a commercial or contract bond. It can also depend on how long you’d need the bond, as the length of risk matters. Different industries require different licenses and other items that cost money in addition to the surety bond, so consider that as well. It can also depend on how your business credit looks currently. If you are worried about having low credit, several helpful options can still get you bonded, so don’t give up the fight for the bid just yet.
How do I know if I will need a bond?
When announcing the RFP (request for proposal), an obligee will usually inform potential bidders of the requirements, including the length of the bond, the type needed, and the amount of coverage required. Varying states will have different requirements, but you can count on our agents to help you work through the Texas-specific bond requirements so that you can get bonded quickly and successfully. SOGO has provided high-risk bonds for over 20 years, including those with lower credit. Contact us at info@sogoinsurance.com to receive information about surety bonds. We can answer any questions you may have, and we work quickly and efficiently so you can get started on what you do best.
In case you missed it: Check out “Key Facts About Key Person Life Insurance” to understand the importance of protecting your key employees.
