Tag: Surety Bonds

What to Know When Hiring Employees

Your construction business is off the ground and running. Even the Wright Brothers are impressed at how you’ve taken flight! But a company is only as strong as its workers. It is important to surround yourself with people who have faith in your business.  It is also important that these people believe in your company’s virtues and philosophy. In today’s blog, we’re going to touch upon topics that are important for any small business owner: Do you know your EIN? To begin with, your employees will be filing taxes and claiming they work for you.  In year’s past, employers sometimes used their social security number as their Tax Identification Number.   This is a big no-no! You should NEVER give out your social security number! Instead, you should apply for an Employer Identification Number (EIN). You can get this from the IRS. You can do this online or through your accountant (definitely make sure you have an accountant!). In addition, any and all tax records should be kept for at least four years, for auditing purposes. Oh, but the numbers! Someone who you should work rather close with is your accountant. Don’t just call your accountant around tax season. Stay in...

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By M L

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To Bond, License and Insure?

Starting your own construction business can sometimes be a leap of faith. But that faith in your business is stronger if you learn about the industry.  For example, it is important to know the benefits of being a licensed, bonded and insured construction company. Why should I be licensed and apply for permits? The simple answer is for protection, for you and your customers. It may be easier to cut corners and not apply for permits or licenses. But, if you want to have a long standing and respective business, licenses and permits are the way to go. First, you will need a general business license.  Beyond that, it is important to check with your local government and state offices to see which other license you may need. Permits are important because they help you to maintain valid parameters. By pulling a permit, you have sought the approval of your local government offices to perform the work that your customer wants. What about insurance, do I need insurance? How many insurances you need depends on the work you perform. If you directly employ workers, then you will need an insurance to protect yourself. If you drive your truck for...

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By M L

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Surety Bonds and Insurances: Are They the Same?

There are many who confuse surety bonds with insurances, as they are both a means to protect finances.  But, in their execution of this goal, they serve different purposes.  Confusing the two or using them interchangeably can stop your business from growing.  In the world of construction, constructions projects may require a surety bond.  With that in mind, the public construction sector is always building and is a good avenue for a contractor to grow their business.  And even many private sector construction jobs require surety bonds.  Having a knowledgeable surety bond producer can help you to grow your business.  Consider them an important tool in your tool box.  Here are some important things to know: A surety bond is a contractual agreement between the project owner or client, the contractor or business and the surety bond producer. The surety bond producer ensures that they have vetted the business and that they are financially sound.  If the business owner does not fulfill the contractual obligations, then the client can file a claim.  If found to be in default of the contract, the client will then receive financial compensation. Surety bonds and insurances are NOT the same thing. Therefore, when...

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By M L

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Surety Bonds and Insurances, Working Together

We have recently rolled out a program to partner up with insurance agents to get their clients the best surety bonds in the industry. So why should YOU work together, as an insurance agent, with Surety Bond Professionals? Well, we’re glad you asked! We offer access to the best carriers. We have been in the field for over 25 years. This has allowed us to form respectful relationships with many surety companies. This puts us in a position to work out deals for difficult-to-place bonds. This translates into better terms, more capacity and better rates for YOUR clients! We pay the highest commissions. We want your business and know you work hard. Thus, we share 30-40% of the premium with you for referrals on ALL bonds your accounts bring in. We treat you and your clients with the utmost respect. Clients, prospects and partners should be treated well. We value our “business family” and consider every one of them to be a part of it. So you can be ensured that you and your clients are in the best care in the business! Much of business is about relationships. The people you work with on a daily basis are...

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By M L

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history of surety bondsSurety Bonds

History of Surety Bonds

Surety bonds are such a regular part of our business world today that it is hard to imagine a time where we didn’t have them.  In a previous blog, we mentioned that the first form of a surety bond occurred in 2750 B.C.  We wanted to investigate a little more about the history of surety bonds.  So, join us, as we take a short trip down surety bond memory lane! 2750 B.C. It all starts with our farmer friends in Mesopotamia, where one friend goes off to serve in the army and creates an agreement with another farmer to take care of his fields while he is away. In order to ensure this, a third party (a merchant) guaranteed that the second farmer would uphold his agreement. Later, in 2400 B.C. we find our first written surety bond, on a stone tablet. The surety guaranteed that one party would pay the other party. Fast forward a few hundred years, to 1790 B.C. and we find the law Code of Hammurabi, with the first legal surety document. We’re moving along here to 670 B.C. where we find our first written surety contract, written closer to how we understand surety bonds...

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By M L

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Is there a Difference Between Surety Bonds and Insurances?

Have you been told that a surety bond is the same as insurance?  Or that insurance is better than a surety bond in the field of construction?  There are contractors, who feel, that construction bonds are not necessary in order for their business to succeed.  Unfortunately, these are often the same contractors who do not see as much business growth as bonded contractors.  All public construction projects required surety bonds.  Since the public construction sector is a reliable industry it is an industry worth working in.  In addition, in recent years, many private sector construction jobs have also began to require surety bonds. What are the main characteristics of insurances and surety bonds? First, we would like to debunk the myth that bonds and insurances are the same thing.  Many people assume, incorrectly, that the term “bonded” and “insured” are interchangeable.  In the case of the contractor, an insurance policy usually refers to liability insurance or workers’ compensation.  They do not protect the project owner, but rather the workers.  For many clients, hearing that a contractor is also bonded, gives the project owner confidence that they will be protected, in the case that the contract is not satisfactorily completed....

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By M L

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Why your Relationship with your Surety Bond Producer Matters

Your relationship with a surety bond producer is like any relationship.  It needs to be a good match for what you are looking for.  A healthy relationship with your surety bond producer can be beneficial.  It can help lower your stresses at work and help your business grow.  But, what should you be looking for in a surety bond producer?  Unfortunately, there are no “match making” surety bond websites.  So we’ve outlined some things to keep in mind when choosing who will be your perfect surety bond producer match. Qualities to Look For First, if you are under the impression that surety bonds are not mandatory, you may actually be losing out on a lot of business.  Research has shown that the public construction industry is always growing and has consistent work.  A huge difference between public and private construction work is that public construction work requires a surety bond.   This is not always the case in the private sector. Having a surety bond producer, who looks out for you and guides you is tantamount to success for any construction company.  A surety bond producer can also help you to better understand certain terms.  Think of them like...

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By M L

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ClaimsSurety Bonds

How Claims Hurt

We’ve emphasized, in previous blogs, that a contractor has control in avoiding claims.  The best way to avoid having a claim filed is to make sure that the contractor fulfills and documents all contractual obligations.  But, if the contractor is not able to fulfill the contractual obligations, a claim may be filed.  This will hurt the  reputation of the contractor in many ways. The Financial Burden of a Claim First of all, the financial burden will be evident once the contractor is found to have defaulted on the contract.  The contractor may have to pay the full amount.  They may also have to pay any legal fees associated with the claim.  A surety bond is not meant to protect the contractor. Instead it ensure the project owner that they will not lose out on money if the contractor defaults on the contract.  If the surety bond producer deems that the contractor has defaulted on the contract, they will pay the project owner.  They will then seek reimbursement from the contractor. The Risk of Ignoring Claims But what if the contractor decides not to pay the claim? They may feel they weren’t in the wrong or may not have the financial...

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By M L

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Four Myths about Surety Bonds

In the contracting world, there are some myths about surety bonds. Do you really need one or is it just an added protection, for a costly price? This leaves the contractor with a decision to make: avoid the project or work without a surety bond. Below we dispel some of these myths: The first misconception is that surety bonds are expensive! This tends to alienate many small businesses from bidding on projects that require surety bonds. Which in essence, loses them money. Usually, (depending on the credit score of the applicant), a bond premium costs between 1% and 3% of the contract sum. Another misconception is that surety bonds are not needed by large construction companies. There is also the misconception that there is a bias towards smaller companies. This is because, many think, that they are more of a risk or liability to award projects to. This myth is based on the idea that large companies won’t need to buy surety bonds because they can afford to have safeguards in place. Have you heard, from colleagues and friends, that all surety companies are equal? This is another misconception. A surety company draws its strengths from its years of...

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By M L

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Surety Bonds Vs Subcontractor Default Insurance

We started a conversation on our Facebook page the other day about the differences between surety bonds and subcontractor default insurance.  We wanted to delve in a little more to help you decide if a subcontractor default insurance (SDI) or surety bond is the best way to protect your business. SDIs have become popular since 1996 as a way for contractors to manage the risk of working with subcontractors.  Basically, through SDIs, the contractor is accepts and manage risks that occur if a subcontractor defaults on their contractual obligations. The trade off is, that the benefits of a performance or payment bond are not applicable in SDIs. Below we break down the different benefits and risks. One of the differences between surety bonds and SDIs  are that there are specific regulations in the surety bond industry, which the state insurance department enforces.     Bond forms are also standard (although are negotiable) in a surety bond. Whereas,  the insurance company mandates which form the parties will use with an SDI.  A surety bond also has the benefit of protecting all three parties (obligee, principal and surety).  An SDI is a two party contract between the insurer and principal. The premium is...

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By M L

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