Georgia Payment Bonds

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Surety Bond Professionals is a family owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your payment bond needs.  

What Are Georgia Payment Bonds?  

Construction contracts include payment schedules that govern the payment of subcontractors and suppliers. When a contractor fails to pay those who contribute labor and materials without a payment bond in place, their only recourse may be to have the project owner’s property encumbered by mechanic’s liens. Georgia payment bonds are intended to protect project owners against such financial harm stemming from a contractor’s noncompliance.  

Who Needs Them?  

Georgia’s “Little Miller Act,” the state’s version of the federal Miller Act, is detailed in Georgia Code Title 13, Chapter 10, “Contracts for Public Works.” It provides the statutory basis for state contracting entities to require a payment bond before a construction firm can enter into a public works contract valued in excess of $100,000. The payment bond must be in an amount equal to the full contract value.  

State law does not mandate payment bonds for private construction projects. Nevertheless, private project owners can, and often do, require payment bonds to protect their property against mechanic’s liens.  

How Do Georgia Payment Bonds Work?  

A Georgia payment bond is legally binding on three parties: the project owner requiring the bond (known as the “obligee”), the contractor purchasing it (the “principal”), and the bond’s guarantor (the “surety”). The principal is legally obligated to pay all claims the surety finds to be valid. And the surety guarantees their payment by lending the principal the necessary funds to pay a claim up to the full bond amount.  

In practice, the surety pays the claimant directly, as an extension of credit to the principal. Thus, the principal’s legal obligation to pay the claim has become a legal obligation to repay the debt to the surety, in accordance with the surety’s credit terms. The surety most likely will initiate legal proceedings to recover the debt if it is not repaid by the principal.  

How Much Do They Cost?  

Two figures go into the calculation of the premium for a Georgia payment bond—the bond amount required by the obligee and the premium rate assigned by the surety.  

The surety’s greatest concern is the credit risk associated with lending money—specifically, the risk of not being repaid for the credit extended to the principal in paying a claim. The principal’s personal credit score is the usual measure of credit risk.  

A high credit score is evidence of low risk, which earns the principal a low premium rate. But a low credit score warrants a higher premium rate to offset the greater risk.  

A well-qualified principal typically will be assigned a premium rate in the range of .5% to 3%.  

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