subject: Important Surety Bonds Contractors Should Obtain [print this page] If you are a contractor offering services to both consumers and industrial businesses, chances are you have built an extensive insurance portfolio to protect everything from your workers to your business operations premises. While you may carry a comprehensive Business Owners and Workers Compensation package, it is important to obtain contract and performance surety bonds that guarantee your bids, contracts and payments to subcontractors and suppliers. While you are aware that the state licensing board requires general contractors to carry a license and permit Maryland surety bond to ensure that you are qualified to do business and will comply with state and local regulations, contract surety bonds are completely separate from these licensing bonds. Understand the purpose obtaining a contract surety bond and find out how it will protect both you and your clients.
Contract surety bonds for all service providers offering construction services and bids are a valuable tool to protect the company and the individual hiring the contractor. Performing services that are promised by a formal contract can be a risky business if the company is unable to perform as promised in writing. In the event the contractor is unable to meet their promise specified in the contract, the customer can lose money because of the contractors failure. Because of this associated risk, wise clients and entities will require contractors to obtain a surety bond to back their promise and pay the principal in the event there is a breach of contract.
There is a Maryland surety bond for each step of the process from beginning to end. A bid bond is designed to guarantee the principal that they contractor will enter into a contract with the client if they are listed as the lowest bid. Once the contractor is identified as the lowest bidder, they will then need to obtain a contract and performance surety bond as required by the project owner. The amounts of the bond will vary depending on the size and duration of the project. Not only will contract bonds give the project owner peace of mind, they will also build your reputation in the industry.
A payment bond is designed to protect subcontractors and suppliers you will deal with during the construction project. Because most contractors will subcontract specific services they do not personally offer, they will be required to pay the subcontractor for the services rendered. By obtaining a payment contract and performance bond, the subcontractors and suppliers you hire will be guaranteed payment upon receipt of the contract payment.
Owning a business without adequate protection is extremely risky and can damage not only your business but also your client's project. By obtaining surety bonds, you can guarantee financial stability and construction assurance and transfer the risk from your company to the surety company taking on the contract.
