The Engineering News-Record released an article on April 15, 2014 announcing that a Maryland law that allowed individual sureties on state projects will expire on September 30, 2014. Click here for the article. Once the law expires, Alaska will be the only state in the country that still allows an individual surety to bond state public works projects.
What is an individual surety? Unlike corporate sureties, which are qualified by being Treasury-listed, an individual sureties are people that are willing to issue bid, performance and payment bonds. Like corporate sureties, individual sureties assume the risk. In the banking world, compare this to an individual making loans and guaranties for a fee, without any regulators policing the lending practices. It’s easy to see how an individual or business could be misled.
The National Association of Surety Bond Producers is our, as surety professionals, voice for legitimate business practices of the surety industry. This is a big win to keep individual sureties from committing fraudulent activities, issuing bogus bonds, and preying on small and emerging business. While the law was created to ‘help’ small contractors obtain bonds, many individual sureties are fraudulent and end up hurting small business.
There seems to be an article every other week about fraudulent bonds surfacing. While not all are from individual sureties, with so much at risk it just makes sense to only have regulated surety companies issuing bonds.
For more information about individual sureties vs corporate sureties, or for general inquiries about bonding, feel free to give us a call at 877-654-2327