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 South Carolina Payment Bonds?
South Carolina payment bonds protect construction project owners from financial loss if a contractor fails to pay subcontractors or suppliers. They achieve this by providing an alternative way for unpaid subcontractors and suppliers to get compensated. The bond legally requires the contractor (the principal) to pay valid claims, with payment guaranteed by a third party (the surety).
Who Needs Them?
Every state has its own version of the federal Miller Act, which mandates payment and performance bonds for federally-funded construction projects exceeding a certain amount. South Carolina’s “Little Miller Act” requires contractors working on state-funded projects over $100,000 to have a payment bond for the full project cost (100%).
The project owner will inform you of any specific payment bond requirements. If a bond is required, it must be active before construction begins.
While South Carolina’s Little Miller Act applies to public projects, many private project owners also request payment bonds to avoid mechanic’s liens.
How Do South Carolina Payment Bonds Work?
The core benefit of a South Carolina payment bond for project owners is the surety’s guarantee to pay valid claims. This guarantee acts as an extension of credit to the contractor to pay the claim. The surety pays the claim on the contractor’s behalf, but the contractor is then responsible for repaying the surety according to their credit terms. Failure to repay the surety may lead to legal action to recover the funds.
How Much Do They Cost?
The cost of a South Carolina payment bond is calculated by multiplying the bond amount by the premium rate. The bond amount is a percentage of the project value (set by statute or the project owner). The surety determines the premium rate based on an underwriting risk assessment. This assessment considers the risk of not being repaid for the credit extended if the surety has to pay a claim for the contractor. The main factor in determining this risk is the contractor’s personal credit score.
A high credit score indicates a lower risk to the surety, resulting in a lower premium rate. Conversely, a low credit score suggests a higher risk, which leads to a higher premium rate to compensate.
Typically, a well-qualified contractor can expect a premium rate between 0.5% and 3%.
Call Us Today
Our surety bond professionals can help you increase your revenue by maximizing your surety capacity. Call us today!