Tuesday, May 31, 2016

Surety Bond Use In Everyday Life

Surety bonds are a part of everyday life.  Many individuals don’t understand the concept of bonds and how they are used to protect parties entering into a contract with one another.  In basic terms a surety bonds are a binding legal agreement that offer financial guarantees to the parties involved in a multitude of contracts.  Surety bonds state that one party, known as the surety is obligated to a second party, the obligee , in case of a default by the third party, the principal.
Various categories of surety bonds:
Contract surety bonds offer both financial security and construction assurance on projects both building and construction.  Contract surety bonds assure the project owner that the contractor will meet the requirements set forth in the contract.  If the contractor fails the project owner the surety company will cover the contract requirements so that the project owner is not at risk of loss.  The surety offers a guarantee that the contractor will perform the job stated while meeting their financial obligations to subcontractors, material providers and employees.
Bid bonds ensure that a contractor submits a bid that is intended to meet the needs of the contract.  The price of the bid that is submitted covers the financial obligations of performing the work as stated in the contract while covering the expenses on their end.
Performance bonds ensure the project owner is covered from loss if the contractor fails to perform the contract as stated and agreed upon.
Payment bonds are in place to make sure that the contractor is liable for the expenses to subcontractors, laborers and materials related to the contract that was entered into.
Maintenance bonds protect project owners against defects in materials or workmanship for a specific, agreed upon period of time.
Subdivision bonds ensure cities, counties and states that the principal, contractor of a subdivision, will financially cover and construct improvements within the sub like streets, sidewalks, curbs, street gutters, and more to make sure the sub meets stated requirements.
License and permit bonds are obtained to allow certain businesses to do business. An example of these bonds include: construction bonds, motor vehicle bonds, employment agency bonds and more.
Fiduciary bonds secure that administrators, executors, guardians and such will perform duties in line with court stated orders.
Different bonds are used in special situations to guarantee that contracts or duties are performed as contracted.  Many people confuse insurance and bond however they are completely different.  Insurance is used to protect individuals or businesses from themselves or others where as bonds are used to make sure expectations are met by others.  Both protect against loss of finances.
Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

Tuesday, May 24, 2016

The Many Contract Bond Types In Construction

Contractor License Bond: Purchasing a contractor license bond is almost always a requirement of contractors before they are licensed to work on construction projects.  Depending on the laws within the state, county, city or even subdivision a contractor license bond could be required.  Without the necessary contractor license bond in place the contractors often cannot obtain the license that is needed to provide construction services.
If work is performed and a contractor does not have a contractor license bond or it has expired they will feel the impact in the form of penalties, fines, licenses being revoked and even legal action. Contractors are wise not to perform any construction work until they have their contract license bond in place.  The expense of not having this in place could sink a contractor before they even have the chance to get their business started.
Bid BondConstruction projects do not all require bid bonds.  They are often asked for by project owners when a contractor is bidding out a project.  Financial proposals are submitted to project owners to provide a cost basis for the project.  Before a contract is entered the bid and contract terms need to be agreed upon.  Many project owners will not award the construction contract to contractors that fail to have a bid bond accompanying the contract.
A bid bond guarantees a contractor is entering into a contract for the amount of the original bid if the contract is awarded to them.  Surety bonds ensure contracts are filled to the terms of the contract that is entered into.  If a contract is awarded the surety bid bond guarantees the contractor will fulfill the contract at the amount originally billed.
Payment BondAny contractor seeking contracts that exceed one hundred thousand dollars are required under the Federal Miller Act to provide project owners with both a payment and performance bond. This includes any publicly funded projects when they include alterations or repairs to buildings that cost over one hundred thousand dollars as well.
A payment bond is a bond that ensures a contractor will cover the cost of materials and the payroll of sub-contractors.  The payment bond keeps the project owner from being liable from any costs if the contractor cannot pay.  The payment bond puts the ultimate liability on the surety company issuing the payment bond.
Performance Bond: Performance bonds are often paired with payment bonds as both protect project owners from loss sustained by contractors failing to meet their obligations.  The performance bond offers a certainty to project owners that the project will be completed at the level of performance that is stated within the contract the contractor and the project owner agree upon.
Contract bonds are a type of surety bond that contractors are issued by surety companies to guarantee project owners are covered from any inadequacy on the contractor’s part.  Each type of surety has criteria that must be met before a contractor’s eligibility can be determined for construction bonds.  Criteria such as the contractor’s skill level, resources, ability to perform and historical criteria have been met. Surety companies analyze the applicants, contractors, overall financial status, work history, standings in financing and credit report before the surety bonds can be issued.
Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

Thursday, May 5, 2016

Checklist To Evaluate Contractors

Looking for a professional contractor for commercial or residential construction projects can be all consuming.  There are steps that need to be followed to ensure that the contractor you are hiring can meet the performance expectations while staying on time and within budget.  In order to evaluate the contractor’s ability to accomplish this you must take time to look into their background.
Looking into a contractor’s background can consist of several things including reference checks, viewing portfolios and analyzing online reviews.
Reference Checks:  As you narrow down contractors to work with it is imperative to ask to speak to both recent commercial and residential clients.  These clients will revile what you can expect when working with the contractor.  This will give you an idea of where you should align your expectations should you choose to work with them.
Portfolio Viewing:  There are many ways in which a contractor can show off their portfolio.  A great way contractors can visually show who they are is through an online forum such as an up-to-date website rich in photos of projects.  Websites that offer images of projects from start to finish can often be the most helpful to individuals looking to hire a contractor.  If you want a closer look at projects completed by the contractor ask them to view a job they are currently working on or have recently finished.
Online Review Analysis: Getting to know a company is made simpler with internet review forums.  Read reviews from individuals reviewing contractors that have worked on projects similar to the one that you are looking to hire them from.  People are completely honest, maybe even too much so when it comes to online reviews.  It is a great place to get to know a contractor through their client’s eyes.
Although evaluating a remodeler’s background offers a great deal of insight to the hiring process it doesn’t offer a complete picture.  When selecting a contractor for construction endeavors it is critical to the success of the project to confirm that all individuals, including sub-contractors, are licensed, insured and bonded.
It is essential that any contractor that is hired for any residential or commercial project not only be licensed and insured but also bonded.  A variety of construction bonds are offered to ensure that all aspects of a project are covered.  Below is a list of bonds that secure the project owners interest in a project from a contractors default.
Contractor License Bond:  A contract license bond includes three different parties including the obligee, the principal and the surety.  This type of bond is secured as a promise that the surety (bonding company) makes to pay the obligee (project owner) if the principal (contractor) is unable to fulfill the contract as stated.
Bid Bond:  When a contractor is bidding on a project a bid bond is required especially on government projects.  A bid bond is used to inform the owner of the project that the contractor can secure a bond if they are the lowest bidder.  It states that the bid amount covers the financial liabilities of the project.  It ensures that contractors don’t low ball a bid in order to get the job only then to ask the project owner for additional funds as the project progresses.
Performance Bond:  A performance bond is used to guarantee that a project is completed.  It ensures that the job is performed as stated within the contract and that it is completed within the time frame that is expected.
Payment Bond: Usually a payment bond is issued in conjunction with a performance bond.  Contractors post payment bonds to ensure that the subcontractors and material suppliers that are working on the project will be paid.
Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

Wednesday, April 27, 2016

The Difference Between Licensed, Bonded and Insured Contractors

What exactly is the difference between a contractor that is licensed, one that is bonded and/or one that is insured?  Competition in the construction industry is brutal.  Wading through contractors to determine the most qualified individual at the most reasonable price leaves many consumers baffled.

Where can consumers skimp and where shouldn’t they when it comes to hiring contractors?  Is hiring a contractor that is not licensed, bonded and/or insured worth the risk?  Probably not; in fact many consumers employing contractors without the proper credentials in place are placing their time, money and project completion in jeopardy.

Below we will detail bonded, licensed and insured contractors. This will allow consumers to have insight into why each is an important certification for hired contractors to have.

Licensed: Contractors are licensed as either a general contractor or specialty contractor.   Specialty contractors are those that offer a specific skill such as plumbing, electrical, drywall and the likes.  Specialty contractors are required to hold a special certification on top of their license.  The contractor’s license number is required to be displayed on any posted marketing materials.

Consumers are able to search for contractors by name or license number to ensure that the contractor’s license is up to date.  When an unlicensed contractor takes off after receiving a deposit there is little protection offered to the consumer this is one of the drawbacks of hiring any unlicensed contractors to do work for you.  An unlicensed contractor may cost less initially but there is no recourse if work is not done in specification to the contract.

Bonded: Bonds are purchased by contractors looking to prove their stability to consumers.  There are a variety of bonds that contractors can purchase to ensure they are trust worthy.  A bond is a contract between the contractor, the property owner and the bonding company.  It ensures that the contractor has financial backing incase the project is not completed as stated in the contract.  Common bonds that many contractors have are bid bonds, performance bonds and payment bonds.  All of which cover consumers from contractor negligence.

Insured: Contractors are required to have insurance to cover their business.  General liability insurance is purchased by contractors to insure that any damage to the property or people is covered financially if anything should happen while completing work at your location.

There are a few more things to consider when hiring a contractor.  Make sure that the contract is comprehensive and that no detail has been left out.  The contract should include the bid and scope of work expected to be performed.  It needs to offer an estimate on the price of permit fees as well as the payment terms, warranties and procedures for changes in the contract.  Often it pays to contact consumers that have recently used the contractor’s services to discuss the contractor’s ability to complete the job on time, within budget and so on.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

Monday, March 28, 2016

The Process Of Obtaining Surety Bonds

Surety bonds are contracts between a business, bonding company and third party.  They are purchased by businesses to confirm the fiscal worthiness of a company as well as to offer affirmation on their reputation.   If a business should fail to comply with a contract the bond acts as financial coverage to the third party.
Obtaining any type of financial backing or support for a business venture comes with a process of verification.  The same is true of business of all sizes seeking surety bonds.  Companies specializing in surety bonds offer assistance to business owners seeking to obtain bonds through agents acting on their behalf.
Surety bond agents guide business owners through the bond process helping them to understand how the history of their business will affect the bonding process on a whole.  They are dedicated to working with business to examine contracts that require bonds and help determine a proper fit between their business, projects and the bond company.  A surety bond agent works to examine the business, assess client’s needs and prepares a submission to the surety bond company.  This is just the start for business owners looking for surety bonding.
The next step in surety bonding after an initial meeting between a bond company and a business owner is working with an underwriter to complete a history of your business and financial setup.  This is to access your overall risk.  The underwriter seeks to determine that you are not at any risk for being able to complete a project as specified within a given contract.  The information the underwriter will obtain consists of the business plan, future projections, positive cash flow, healthy credit, professional references and information on the chain of command within the business.
Prepare ahead of time by seeking out items such as annual finance statements for at least the last three years, cash flow statements, current accounts receivable and payable as well as an understanding of the accounting method used within the business.
Depending on the information provided on the company’s history and current financial situation the surety company give a rate in which the bond is to be issued at.  A solid history and financial status allows owners lower rates; a total of one to three percent on the total bond.  A business with risky historical data and uncertain financial situation can find themselves paying upwards of fifteen percent on a bond rate. The rate is dependent upon the risk the business, the more likely the business is to default the higher rate they must pay the surety company for the bond.  The bond is normally paid in one single payment.
Obtaining a bond can be an expensive endeavor.   To ensure that the business is qualifying for the best rate or to receive quotes from different companies before making a bond purchase go online and research the options available in the state in which business is conducted.  Surety bonds protect business owners and the people that are doing business with them from the risks involved throughout the process.  The most common bids obtained in the construction bonding process include: bid bonds, performance bonds and payment bonds.  Seek out a professional bonding company today to ensure the business and those it contracts with are covered in case of default.
Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

Thursday, March 17, 2016

The Important Of Surety Bonds

The bonding process may seem like a paperwork inconvenience.  The reality though is that without the financial support of bonds and the financial backing of surety bonding companies that often times the final result would not happen.  This is why surety bonding is so important throughout construction process.  Bonding ensures that all parties involved in a project are covered financially to complete the project at hand if there should be a party the defaults on the contract.
Performance bonds are in place to guarantee that work on a certain project will be done to the specifications set forth in the contract within a certain timeframe. This allows other aspects of the project to be scheduled without the fear of loss that comes from rescheduling and such.
Consider the following: a renovation on a school. The process begins with the bidding process.  School districts need to be certain that the contracted work can be completed within a certain time frame to ensure that when school starts in the fall the renovation is completed and children are not left without classrooms.  If the work is not completed as specified many people will suffer.  With bonds in place the obligee is protected from financial loss and is covered by the performance bond held by the contractor.
There are a variety of bonds used to ensure the flow of public construction projects.  In order to bid on any government or public project contractors must have established a bid bond with a surety company.  A surety company will look at the contractor’s history and determine a set fee on a bond.  A bid bond states that the bid that is submitted is fair and reasonable.  It states that a project can be completely fulfilled at the cost the contractor has bid.  This ensures that contractors don’t manipulate the bidding process by submitting a low bid in order to get the contract only later to raise the amount required to complete the project.
Another bond that is required on public projects is a performance bond.  A performance bond is a guarantee that states work will be performed as set forth in the contract.  The work is performed using specific materials, with a specific time frame and is done so as stated within the contract.  A performance bid protects the project owner from subpar workmanship and work not being performed within a certain time frame.  With all construction projects a clock is ticking.  One error on the part of a contractor or subcontractor can quickly spiral out of control. Bonds are used to ensure that the financial liability does not fall on the project owner.   All contractors have the same goal: to complete the job in a timely manner with the expected outcome.  Construction bonds help to protect all parties against financial catastrophe.
Surety bonds do not replace the need for insurance.  Liability insurance is different that a contractor’s bond.  Bid, performance and payment bonds are all used as another level of protection against things that occur that cannot always be controlled throughout the construction process.
Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

Tuesday, February 23, 2016

Ending The Confusion When Hiring A Contractor

If you are confused about hiring a contractor to do work around your home you are not alone.  The terminology is a bit confusing, laws in each state are different and regulations are constantly changing which makes the whole process of hiring contractors to perform work on your home is difficult.  Licensing within different trades be it electricians, plumbers, construction or heating and cooling are very specific as well.  Below we attempt to define the terminology used throughout the industry and how it relates to specific contractors within different industries.
  • Licensed Contractors: A license is granted to contractors throughout different trades as authorized by local and state laws. This ensures that the contractor has passed tests regarding their business practices, trade skills and ability to pay for the fees associated with the required license and bonds.
  • Registered Contractors: Contractors that have been registered are only required to prove they are offer insurance and can pay the required fees. These requirements are often less stringent than what is required for a contractor to become licensed.  To be a registered contractor you rarely have to pass any trade related competency tests or to be bonded.  Licensing and registration terms are often used interchangeably.
  • Bonded Contractors: Contractors that are bonded have obtained an agreement with a third party, a private company that offers surety bonds, to ensure that the consumer is protected against any misdoings by the contractor. If contractors fail to perform work as contracted, fail to pay for materials or their subcontractors or what not, their customer can petition the surety company for reimbursement for the failure of the contractor to perform as stated within the signed contract.
  • Insured Contractors: Contractors should all be insured. They should hold two types of insurance: liability insurance and workers compensation.  Liability insurance protects the homeowner against damage done to their property.  Workers compensation protects workers hired by the contractor from coming after the homeowner if injured or killed while working on your home.
Before choosing a contractor to complete work around your home verify you are protected from wrongdoing.  Ask contractors for all certificates that state they are registered, licensed, bonded and insured.  If the status of any of these certifications is questionable don’t feel pressured into hiring this individual contractor.  All certificates should be current and cover all aspects of the project that is to be completed.  Once you have confirmed and verified a contractor be sure to file copies of all paperwork, certifications and such in a place that is easily accessible.  This will ensure if proof of you will have it at your finger tips.
Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.