A contractor provides this type of bond which guarantees that the contractor will repay or settle the cash paid in advance by the owner of the contract.
An advance payment surety bond assures the owner of the contract the contractor will fulfill his/her promised duties. A bond tells clients the contractor is legal and allows clients to be assured they will be financially and legally protected in any case of fraud or misconduct.
In the event of the contractor acting against the contract, the surety company ensuring the bond will recover any loses which the contractor must repay to the surety company.
If a new contractor is requesting an advance payment bond, there are some supporting documents that may be required.
- Contractor questionnaire
- Financial statements for the business (income statements, balance sheets, statement of cash flows, aging schedule for accounts)
- Personal financial statements for the business owner(s).
- Copies of insurance (general and professional liability, worker’s compensation, etc).
- Current work in progress schedule
- Copy of contractor’s license and any other necessary licenses
- Bank reference letter
- Copy of trust if owner(s) have any assets held in the trust
- Articles of either incorporation, LLC agreement, or partnership agreement
- Resume for all key personnel of the business
The bond amount varies since each contract job costs a different amount, so premium for the bond will vary.