Whether you’re new to the bonding process or just want to clarify some things, our experienced surety agents at Surety Bond Professionals are here to help. Learn how to get bonded for construction below, and feel free to contact us today with any questions you may have.
What Are Construction Bonds?
A construction bond is a contractor’s guarantee to comply with certain requirements of a project owner. Failure to meet all of the bond’s terms and conditions can result in a claim against the bond. Although the surety company may pay the claim initially, the contractor is legally obligated to reimburse the company. Note that there are many different types of bonds that serve different purposes, and not all of them will be required for your project.
When Do You Need To Be Bonded?
Federal legislation known as the Miller Act requires performance and payment bonds for prime contractors on federally funded public works projects valued over $100,000. Most states have similar legislation, the Little Miller Act, which applies to contractors on projects with a value in excess of $50,000. Owners of privately funded construction projects may also require contractors to be bonded in order to bid on or work on their projects.
What Types of Construction Bonds Are There?
Typically, the first bond required for a given project is a bid bond, which guarantees that you will accept the job is you’re the winning bidder. If you are awarded the contract, you’ll most likely also need a performance bond guaranteeing that you will complete the job in compliance with the terms of the bond.
You may also be required to purchase a payment bond as your pledge to pay suppliers, subcontractors, and laborers. And in some cases, you may need a maintenance bond, which serves as a warranty on your work for a specified period of time after project completion. Additionally, many states and/or municipalities require contractors to obtain a license bond in order to be granted a license to operate in that jurisdiction.
Learn more about the Major Types of Construction Bonds.
How Do You Get Bonded?
Though there are several different types of construction bonds, the process for becoming bonded is pretty much the same, regardless of the specific type of bond you’re trying to obtain. The process begins when you contact a surety bond company once you’ve learned the bonding requirements for your particular project.
Today, that often starts with a contractor requesting an online quote from a surety company’s website. Many contractors establish a relationship with a specific surety company and rely on that company to underwrite and issue all of the bonds they need.
You’ll need to complete an application, paper or online, each time you need to obtain a bond. Note that the single biggest factor in determining your acceptance and the premium rate you will pay is your credit score. Generally, the higher your credit score, the lower the premium rate. Depending on the type of bond and the required bond amount, you may also need to provide financial statements for the underwriting process. In some cases, especially if you’re a new contractor, you may also need to provide proof of industry experience.
What is Construction Bonding Capacity?
One advantage to establishing a relationship with a surety company is that you become a known quantity, and as you demonstrate that you are trustworthy and financially responsible, the company will be willing to increase your bond line. This is your bonding capacity, which is similar to a bank line of credit. It is expressed as a single limit (the highest bond amount you are eligible for on a single project) and an aggregate limit, or the highest total amount you can be bonded for at the same time for multiple projects.
Get Bonded Today
Surety Bond Professionals is a family owned and operated bonding company with a focus on construction bonds. We have access to over 25 surety markets and over 30 years of experience providing all kinds of surety bonds. We proudly serve clients nationwide through our convenient online quoting process. Find the bonds you need, get expert assistance from our knowledgeable agents, and apply today.