Wisconsin Payment Bonds

  • Home
  • Wisconsin Payment Bonds

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 Wisconsin Payment Bonds?

Wisconsin payment bonds provide significant financial protection for construction project owners. Specifically, they prevent the owner’s property from being encumbered by mechanic’s liens in the event that a contractor fails to pay subcontractors or suppliers. A payment bond protects the project owner (the “obligee”) by legally obligating the contractor (the “principal”) to pay the valid claims of subcontractors or suppliers who have not been paid. A third party (the “surety”) guarantees the payment of valid claims, thereby eliminating the need for mechanic’s liens.

Who Needs Them?

Wisconsin’s Little Miller Act, like the federal Miller Act, requires both payment and performance bonds from contractors selected for public works projects that meet certain threshold criteria. (See the Wisconsin Statutes, Section 779.14.) In Wisconsin, contractors are required to furnish a payment bond before beginning work on state-funded projects valued in excess of $100,000. The payment bond amount must be equal to the contract value. The obligee will let you know what payment bond requirements you must meet.

The Little Miller Act does not apply to private construction projects. But many private project owners require payment bonds from their contractor’s protection against mechanic’s liens.

How Do Wisconsin Payment Bonds Work?

In guaranteeing the payment of valid claims against a payment bond, the surety is agreeing to extend credit to the principal for the purpose of paying claims, if that becomes necessary. In practice, the surety will pay the claimant directly, which creates a debt the principal must then repay in accordance with the surety’s credit terms. A principal who does not repay the surety is likely to end up in court as the defendant in debt recovery proceedings initiated by the surety.

How Much Do They Cost?

What you will pay for a Wisconsin payment bond depends on the bond amount established by the obligee and the premium rate set by the surety. While the bond amount is based on the contract price, the premium rate is based on the risk of the surety not being repaid for the credit extended in paying a claim. The surety measures this credit risk by the principal’s personal credit score.

A high credit score means the perceived risk to the surety is low, which results in a low premium rate. Conversely, a low credit score calls for a higher premium rate to offset the greater risk to the surety.

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

Call Us Today

Our surety bond professionals will help you grow your revenue by maximizing your surety capacity. Call us today!