Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Florida performance bond needs.
What Are They?
Florida performance bonds are a type of contractor or construction bond required by many project owners. They serve as a contractor’s guarantee to abide by the terms of the contract and complete the work accordingly. They also provide financial protection for the project owner in the event that a contractor becomes insolvent or for any other reason defaults on a contract.
Who Needs Them?
Florida’s “Little Miller Act” imposes the same performance bonding requirement as the federal “Miller Act.” Specifically, when a contractor is awarded a contract on Florida public works projects valued in excess of $100,000, they are required to purchase a performance bond in the full amount of the contract. In recent years, many private project owners are also requiring such performance bonds to protect themselves and their investors.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
The surety bond agreement for a Florida performance bond is a contract that is legally binding between three parties:
- The project owner, or “obligee,” requiring the bond
- The contractor, or “principal,” purchasing the bond
- The surety bond company, or “surety” for short, underwriting and issuing the performance bond
In selling a performance bond, the surety is agreeing to extend credit to the principal in the required amount of the bond. If the obligee is left holding the bag, so to speak, because the principal failed to complete the job satisfactorily, the surety will attempt to negotiate a settlement that ensures completion of the job, either by the principal or by another contractor brought in for that specific purpose.
When no settlement is possible, the obligee will have a valid claim against the bond—a claim that the principal is legally obligated to pay. Typically, the surety will activate the credit line established for the principal at the time the bond was issued and use that to pay the claim on behalf of the principal. The principal must repay the resulting debt to the surety, which usually is done by making regular payments over a period of time.
This approach to claims payment gives the obligee the funds necessary to see the project through to completion while allowing the principal to repay the debt on a manageable payment schedule.
What Do They Cost?
The premium cost for a Florida performance bond is a small percentage of the required bond amount. That percentage is the premium rate, and it varies from one contractor to the next. The surety is primarily concerned with the likelihood of claims being made against the bond and how readily the principal will repay the surety for funds advanced to the principal.
Consequently, the primary underwriting considerations are the principal’s company and personal financials, industry experience as well as personal credit score. Most contractors will pay a premium rate that’s in the range of 1% to 3%.
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Our surety bond professionals will help you grow your revenue by maximizing your surety capacity. Call us today!