A financial guarantee bond can be difficult for an applicant to obtain approval for. But, with the right expertise from a surety bond producer, it can be done with very little hassle. These bonds encompass a large number of different types of bonds where the only remedy is straight financial payment. Learn more below, or request a quote today.
What Is A Financial Guarantee Bond?
A financial bond is an indemnity bond which cannot be cancelled. In the case that the principal cannot perform their contractual obligations, it ensures that they will reimburse the obligee for the violation. Some examples of a financial guarantee bond are tax bonds, Medicare and Medicaid bonds. Because of the complexity of these bonds, they can be extremely hazardous. Therefore, they are carefully underwritten.
Generally, the insurance company guarantees that the business bonded pays the principal and interest according to the contractual agreement or promissory note. Due to the complexity of financial guarantee bonds, it is a customary recommendation that the surety producer familiarizes themselves with the specific requirements.
Factors Impacting Cost
- A commercial bond application: This provides general information and may help the surety bond producer determine the bond amount, who is asking for the bond of the principal (obligee), contact information for the principal, etc. If any of the information is inaccurate, the application may not gain approval.
- Business Financial Statements: Possibly including, but not limited to, balance sheets, statement of cash flow, income statements, etc.
- Owner’s Financial Resume: A complete history of the owner or people overseeing the business. This helps to assure that the owner or employees have the experience and knowledge to successfully run their business.
- Owner’s Personal Financial Statements: Similar to the business financial statements, only in regards to personal statements.
- Current Bank Statements: Ensure that the principal has a certain net worth. The most efficient and easy way to do this is to provide bank statements.
- A copy of a license or permit: In some cases, commercial bonds will need proof that the principal is in possession of the necessary permit or license.
- Financial Bonds are complex and require expertise knowledge of the specific surety bond.
- They are sometimes high risky and may require extensive financial documentation.
- The application process can vary for each surety bond producer.
- Extensive financial documentation may be a requirement (such as, the application as well as the owner’s business and personal financial information and possibly a copy of a license or permit).
Apply online today so we can start assessing your surety bond needs and guiding you through the application process. We have some of the best relationships with underwriters in the industry and have been building our knowledge of the industry for decades, making us an expert in the field.