Building The Right Approach To Obtaining A Surety Bond

Orlando construction companies have a lot more than stormy weather to contend with

in running a successful businessnavigating the steps in obtaining surety bonds can be a daunting process.

A surety bond is essentially a promise of sorts between at least three parties. The obligee is the party that receives the obligation; the principal is the entity that has agreed to perform the obligation for which the contract is established; and the surety is the party that guarantees the obligee that the principal is equipped to perform the task as stipulated in the contract. If the principal fails to deliver according to plan, the obligee will seek recovery via the surety bond and in turn, the surety will be reimbursed by the principal through an indemnity agreement.

There are many different surety bonding companies, and each has its own requirements, rules, and standards that it adheres to when reviewing applications for surety bonds. The application process is much like applying for a bank loan. Bonds under $500,000 will likely require less extensive background information than is necessary for bonds of higher amounts. Ones personal credit history is evaluated and as well as their overall financial condition is looked into. Depending on the amount of the bond in question, the following documents may be requested for review:

Personal financial statements

Business financial statements (past three years)

Evidence of borrowing capacity

Certificate of insurance (current)

Proof of current trade license

Costs for surety bonds

Costs for surety bonds vary, depending on the kind of bond requested, the strength and quality of the surety company issuing the bond, and the overall quality and depth of the financial statements that are submitted to the surety bond company for application. Working with a professional insurance agency that is experienced in the surety bond market can be essential to successfully applying for surety bonds of the proper limits, and ensuring those bonds are priced appropriately. Whats more, an insurance agent can analyze the obligees profile and provide guidance on what could be done to qualify for reduced rates in the future.

Having access to surety bonds is a win-win for both principals and the companies with which they wish to conduct business. A quality surety bond offers peace of mind by demonstrating the reliability and credibility of the principal it guarantees, which in turn makes a potential obligee more inclined to establish a contract with the principal.

by: Kevin Luedtke

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