Surety1 has the expertise to place almost any size bond and is a valuable business partner for any company that wants to grow its surety capacity. Performance and payment bonds are not insurance, so why purchase them from an insurance agent? All we do are surety bonds. (More about Surety1 here.)
In addition to performance bonds for construction contracts, Surety1 has expertise in placing performance and payment surety bonds for service contracts like security contracts, janitorial, and even Information Technology projects.
Surety1 has access to the Small Business Association’s Surety Bond Guarantee Program. This gives you an extra guarantee from the SBA on your bid, performance, and payment bonds issued by surety companies. The SBA Bond Guarantee program is designed to assist small and emerging contractors obtain more bonding capacity than they are able to in the standard surety markets. This program may also be available to contractors that may have challenged credit.
A performance bond is a type of surety bond which guarantees to the obligee (the entity or person being protected by the bond) that the principal (the contractor applying for the bond) will successfully completed the project in accordance with the terms and conditions of the agreement.
If the contractor fails to complete the project in accordance with the terms of the construction agreement, the surety company will either complete the contract itself, or arrange for a contractor to complete the contract. The surety company will pay the new contractor the amount required to finish the work, minus the unpaid amount under the original contract. However, the surety company is not obligated to pay more than the penal sum or limit of liability stated in the bond.
If the surety suffers a loss, the surety will seek restitution from the contractor. A performance bond is not insurance.
“I had difficulty acquiring a performance/payment bond elsewhere but Surety1 stepped up and was able to get the bond for me.” Bao Kephart, TBK Electric
The cost performance and payment bonds vary. There are many factors that influence rate.
Most small, infrequent users of surety credit will pay 2.5% to 3%. Larger, established contractors can obtain bonds at rates starting at 1%.
There is a plethora of variables for both large and small contractors that can impact the cost of a performance bond.
For more information, call Surety1 today at 877-654-2327 and ask for the contract department.
A payment bond is a bond issued by a surety company that guarantees the client (obligee) that if the contractor (Principal) fails to pay its subcontractors and material suppliers on the bonded project, the surety will make the payments up to the penal sum of the payment bond. In essence, the payment bond guarantees a lien-free project. The payment bond is usually issued with a performance bond and is included in the price for performance and payment bonds.
When bidding a public works project, a bid bond is usually required as part of the bidding process. The bid bond is 20% of the bid amount on Federal projects and varies from as low as 5% to 20% on other public works bids. For instance, if the job bidding is $1,000,000 project, the amount of the bid bond on a Federal project would be 20% of the amount bid or $200,000.
Read more about bonding and other useful information on by reviewing the Federal Acquisition Regulations (FAR).
The bid bond, in its most simplistic terms, is a promise that the successful bidder will enter into a contract and provide the necessary performance and payment bonds. A bond claim would cover the difference between the cost of the low bid to the next bid. While the bid bond is only a small percentage of the bid amount, the surety will underwrite it based on the total contract price.
The purpose of the surety is to pre-qualify the contractor. As such, the amount of underwriting required varies a great deal depending on the size of the job a contractor is trying to bond. For instance, a small project of say $500k or less, may only require a simple application. The surety will pull business and personal credit, maybe verify some previous experience, and agree to provide bonding based only on that information. Performance and Payment Bonds for larger projects will require more information, mostly financial in nature. Personal and business financial statements, verification of certain assets and a proven track record will be required. As a contractor continues to grow, the surety will require CPA prepared financials (review quality or better) prepared on a percentage of completion basis. Resumes on key personnel and a meeting with the surety underwriters may also be required as a contractor grows.
Check back often, more performance bond underwriting blog posts are coming soon.
Surety1.com is a service of AssuredPartners, one of the largest and fastest growing insurance agencies in the nation. Since 2003, Surety1 is the premier online provider of surety bonds nationwide. Licensed in all 50 states and the District of Columbia, Surety1 can handle all of your surety bond needs. The company maintains an A+ rating form the Better Business Bureau and a 5 star rating from Trustpilot.