Getting a commercial surety bond is essential for a business to operate legally. Being bonded shows your customers that you’re financially responsible and committed to ethical business practices, whether you’re a contractor, mortgage broker, or insurance adjuster.
The process for obtaining a surety bond requires a rigorous review of your financial security and qualifications in your industry. If you meet these requirements, obtaining the bonds you need to run a successful business can be easy.
Cost-Effectiveness
When a business has commercial surety bonds, customers can feel more confident in completing a project and getting paid for the work done. It also protects other parties involved in the contract from financial loss if the contractor fails to comply with their terms and conditions.
This bond process requires a third party to examine the applicant’s financial stability and overall qualifications in the industry. Businesses that need help meeting these criteria will need help to obtain a bond.
The cost of a commercial surety bond is determined by some factors, including the type of industry you operate in and the region in which you do business. It is important to shop around for the best rates.
Customer Confidence
Whether you are a business owner or a service provider, customer confidence is essential to achieving sales success. High customer confidence means that your customers will have a positive experience with your company and will continue patronizing it again.
This is a key part of customer retention strategies because it ensures they can count on your company to deliver quality services and products when needed. It also helps support customer loyalty programs because customers will go out of their way to recommend your company to other people.
To obtain a commercial surety bond, you need to work with a surety bonding company that is authorized to sell the type of bond you require in your state. These companies will run a credit check to determine your financial standing and assess the risk you pose.
Access to New Opportunities
Bonds are third-party guarantees that ensure a contractor will complete a project according to the terms and conditions of the contract. They also guarantee payment to suppliers, subcontractors, and others involved in a construction project.
A surety looks closely at a contractor’s business plan, credit lines, past projects, financial history, and references to determine whether the company is reliable enough for a bond. They want to work with companies with “character,” capital, and capacity, three key components for success.
Small contractors often can only compete for large contracts with adequate surety bonds because they need more net worth and working capital to overcome surety underwriting requirements. The recession has exacerbated this problem, creating layers of complexity that are increasing the demand for surety bonding programs designed to help small contractors obtain the necessary bonds.
Cross-selling, such as performance and payment bonds, helps agents earn more revenue while strengthening client relationships. Agents can build their portfolios and grow their businesses by understanding client’s needs and offering them the appropriate bonds.
Legal Protection
A commercial surety bond is a good way to protect yourself and your business from legal issues. These bonds are issued by companies licensed to do so, either federally or by one of the provincial insurance regulatory bodies.
A surety bond is a written contract between three parties. The Principal (an individual or business entity), the Obligee, and a Surety Company agree that the Surety will pay if the Principal fails to fulfill their contractual obligations.
Government agencies and businesses typically require these bonds to obtain a license or permit. For example, you may be required to obtain a construction surety bond before pulling a job permit within a certain jurisdiction.
There are several types of commercial surety bonds. These include license and permit, official public, and fidelity bonds. These are all required by law to comply with local regulations and meet security requirements.
