Tag: Construction Bond

A Quick Guide to Surety Bond Terms

Once you have made the decision that a surety bond can help grow your business, knowing the basic construction surety bond terms can help to expedite the application process.  And, it also helps to know which bond you will need for specific parts of the project.  Yet, if looking for a more comprehensive description, our other blogs on the topic can help. What is a Bid Bond? A project owner may require this bond when bidding for a job.   Usually needed in public construction projects, it ensures that the bidder is able to complete the job at their proposed bid. What is a Payment Bond? This bond protects those associated with the jobs.  This may include other contractors, subcontractors, laborers and material suppliers. What is a Performance Bond? This ensures that the job will be completed as per the contractual stipulations. What is an Ancillary Bond? Not used as often as the previous bonds, this bond covers specifications not mentioned in the contract.  For example, stylistic elements. What is a Subdivision Bond? A project owner may require this bond to cover such projects as replacing a sidewalk or sewer system. These five terms can help you to decide which...

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Surety Bond Vs Letter Of Credit – What’s The Difference?

There are many financial products that help a construction company to grow, both in the private and public sector.  Two of these products, a surety bond and a line of credit, can be helpful in becoming more successful.  Knowing the difference between the two can help your business to grow. Surety Bonds vs Lines of Credit To start, both surety bonds and lines of credit (LOCs) provide financial protection. Yet surety bonds tend to take that protection a step further.  By definition, a surety bond is a three party agreement between the project owner, the surety bond producer and the contractor.  Two of the most utilized surety bonds in the industry are performance bonds and payment bonds.  A performance bond ensures that the contractor upholds the contractual obligations specified in the contract.  A payment bond guarantees that the contractor pays all associated with the project.  This can be anyone from laborers to subcontractors, material suppliers and other employees as specified in the contract.  A LOC is a cash guarantee.  It allows the owner to call upon it on demand.  It works as a payment to the owner, but is an interest loan for the contractor. A surety bond is based...

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