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.