All businesses need surety and assurance nowadays since it will help protect you as the owner and your business. The thing that will help keep your business safe is by investing on a contractor bond so you can easily evaluate and manage all the risk of your construction projects.
How Does A Contract Bond Work?
The project owner seeks your services as a contractor. You will have to meet their requirements to fulfill the contract. But prior to starting the job, you should first get a surety or contractor bond from a surety company. The contractor bond enables you to enter into the contract safely and protect your business.
A contractor bond helps screen out unqualified contractors, which makes it a good investment in your business. However, it is not easy to obtain a contractor bond since you have to undergo a prequalification process to determine if you are capable of fulfilling the given contract.
What Is The Contractor’s Obligations?
You, as the contractor, are backed up by the surety company. The deal includes your performance according to the terms and conditions of the contract. It is also you duty to pay your subcontractors, laborers, and suppliers.
Types of Contractor Bonds
The first is the Bid Bond. The benefit of the Bid Bond is that you are guaranteed to enter the contract with the owner and perform as required, and furnish the payment bond.
The second is the Payment Bond. This type of contractor bond ensures that all subcontractors, laborers and suppliers are paid for all the labor and materials supplied to you and used for the project.
The third is the Performance Bond. Signing the performance bond guarantees that you will follow all the terms and conditions written in the contract with the owner.
The fourth and last is the Maintenance Bond. This contractor bond covers some period of time, usually a year, after finishing the job. Maintenance Bond ensures that no defective material or workmanship will appear during this period.
Work With A Reliable Surety Company
A contractor bond can be a little costly depending on the amount of the construction project. But it is a good investment to help protect your business and increase your likelihood of getting projects. Before accepting a contractor bond, make sure that you only work with reputable surety companies to ensure you are purchasing legitimate bonds and contracts.
In the case problems arise, it is very important to have a contractor bond. The surety company will help you overcome the challenges with the help of accountants, attorneys, and engineers. In different situations from loss of a key member, sudden changes in site conditions, or some financial issues, the surety company will put their expertise and knowledge upfront to minimize losses and help accomplish the job the satisfaction of both project owner and contractor.