FAQ

Commonly Asked Questions

1) What is a Surety Bond?

A surety bond is a three-party agreement between the principal (often a contractor), the obligee (the project owner), and the surety company. It serves as a promise that the principal will fulfill their contractual obligations listed in the bond. Unlike insurance, which protects against risks, a surety bond guarantees the fulfilment of obligations.

There are two main categories of surety bonds:

  • Commercial (Miscellaneous) Surety Bonds: These bonds cover a wide range of obligations outside of construction contracts.
  • Contract Bonds: These bonds are typically used in construction projects and guarantee that the contractor will fulfill their contractual obligations.

Common Types of Contract Bonds:

  • Bid Bond: Provides financial protection to the project owner in case a bidder is awarded a contract but fails to sign the contract or provide the necessary performance and payment bonds. Bid bonds are provided at no cost.
  • Performance Bond: Assures the project owner that, in the event of a contractor's default, the surety will ensure the completion of the contract.
  • Payment Bond: Guarantees that subcontractors, laborers, and suppliers will be paid for the work and materials they provide on the project. Payment bonds protect the project owner from potential liens and claims against the property.
2) What are the Costs Involved in Getting Set Up for Bonding?

At Bonds Southeast, there are no setup, underwriting, maintenance, or bid bond fees. However, in some cases, the surety may request that a contractor enhance their financial statements to qualify for larger bonds. This might involve investing in higher-quality CPA statements, which could be seen as a part of the process of setting up a larger bonding program. We offer guidance on your options and potential benefits before you decide to invest in a higher-quality CPA.

3) How much does a surety bond cost?

Several factors can influence the cost of a surety bond, including the bond amount, the type of bond, the applicant's credit history, and the applicant's financial strength. Typically, costs are between 1-3% of the bond amount.

4) How Do I Obtain a Surety Bond and What Information is Needed?

Obtaining a surety bond is akin to applying for a bank loan. The process becomes more intricate for larger bond amounts. For bonds under $750,000, approval may be possible with minimal information, especially if you have a clean personal credit history. However, for larger bond programs, we'll require detailed information to help the bonding company assess your character, ability, and financial standing. The amount of information needed varies, so it's best to contact us for personalized guidance. While the process can be swift, it's essential to discuss the various options to ensure the best outcome for you.

Regarding the information required, it can vary based on the bond size. For smaller bonds, a simple application suffices. However, for larger bonds, we typically request:

  • Personal Financial Statements
  • Corporate Financial Statements for the last three years
  • Current Work on Hand
  • Evidence of Borrowing Capacity
  • Copy of your trade license and current certificate of insurance.

Questions about any of these requirements? Feel free to reach out to us, and we'll assist you. Additionally, you can find forms and applications on our website for your convenience. **Add Link**

5) How Do I Determine Which Bond I Need?

The bond you need is usually a requirement for a professional license or registration, a permit, a court, or whomever has asked you to get a bond. Obligees can be state, municipal, or federal entities, courts, or other authorities. You can usually find information about the required bond on their respective websites. If not, a simple call to them can provide you with the necessary bond form.

6) What Happens if I don't fulfill the obligations covered by my surety bond?

If you fail to meet the obligations outlined in your bond, it may result in a claim and the surety company may step in to fulfill the obligations on your behalf. You'll then be responsible for reimbursing the surety for any costs incurred.

If you find yourself in a situation where you anticipate or are already involved in a surety bond claim, it's crucial to establish direct communication with the surety company promptly. If feasible, aim to resolve the matter with the claimant before it escalates into a formal claim. It's important to note that claims or a history of claim issues can significantly impact your future ability to obtain surety bonds.

7) How do I renew my surety bond?

Not all bonds renew, however, we'll notify you when your bond is due for renewal and guide you through the process. Renewal typically involves updating your information and paying the renewal premium.

8) Do you offer bonds in my state?

We provide surety bonds nationwide. No matter where your project is located, we can help you obtain the bond you need.

9) How long does it take to get approved for a surety bond?

Approval times can vary depending on the type and complexity of the bond, as well as the information provided in your application. In many cases, we can provide same-day approvals.

Still have a question? Please contact us below.

 

NOTE: We do not write Bail Bonds

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