Businesses need surety bonds to prove their trustworthiness and secure financing or contracts. A surety bond is a financial guarantee that protects the principal from financial loss in case of negligence, breach of contract, or failure to perform. Businesses may hesitate to get a surety bond because they think it’s too expensive, unnecessary, or something unheard of. But this is not the case with Surety bonds. They are common and affordable for businesses of all sizes and industries. In this blog post, we will explain why a business needs surety bonds and how you can get one as an entrepreneur or business owner.
Why do Businesses Need Surety Bonds?
A surety bond is a type of insurance that guarantees a company or contractor will perform their agreed-upon work or obligations under a contract by law. There are primarily two reasons why businesses need surety bonds – Procurement and financing.
Types of Surety Bonds
Surety bonds come in different types such as Contract Bonds, License and permit Bonds, Fidelity Bonds, Customs Bonds, Insurance Premium Bonds, and Bank Guarantees.
Contract Bonds– Contract Bonds are used when a contractor is required to construct a project such as a building, highway, or water project. Contract Bonds provide coverage that helps to protect the owner in case the contractor fails to complete the project as specified in the contract.
Fidelity Bonds– This type of bond secures the company’s money, such as employee time and attendance, against any losses due to the actions of an employee’s dishonesty.
Customs Bonds– These are needed if your business imports or exports merchandise and requires a guarantee that the goods will be cleared by U.S. Customs and Border Protection.
Insurance Premium Bonds– This ensures that an insurance company will pay any claims made by policyholders.
License and Permit Bonds– This type of bond covers the non-payment of taxes and permits required by the city or state.
How to get a Surety Bond?
To get a surety bond, you need to find a bonding company to act as your surety. The following are ways to find a surety bond company:
– Ask Your Industry Experts – Your industry peers might be able to recommend a company.
– Call Your Local Small Business Development Center
– Find A Company Online
Conclusion
Businesses need surety bonds to prove their trustworthiness and secure financing or contracts. A surety bond is a financial guarantee that protects the principal from financial loss in case of negligence, breach of contract, or failure to perform. Businesses may hesitate to get a surety bond because they think it’s too expensive, unnecessary, or something unheard of. But this is not the case with Surety bonds. They are common and affordable for businesses of all sizes and industries.