Surety bonds
assure project owners that contractors will complete the work they agreed to and that contractors will pay their subcontractors. Surety bonds are required for any public works project, however, private contractors may use them with homeowners as well. Surety bonds may be obtained through insurance companies. These bonds are designed to compensate project owners for unforeseen problems during the course of a project. Surety bonds are usually obtained by contractors and their subcontractors.
Instructions
1. Contact insurance companies or surety bond agents. Your current insurance company may have a surety bond department. Make sure whatever company you deal with is licensed in your state. It's also best if they're familiar with your particular type of business. The National Association of Surety Bond Producers has a list of providers at their website.
2. Gather the information you'll need to give to the surety bond agent, who will then present it to one or more surety company underwriters for approval. Your agent can discuss what's required, but it may include financial statements prepared by a CPA, resumes of key employees, a business plan, evidence of a bank line of credit and good cash flow and letters of recommendation from project owners of completed projects. The goal is to show that your contracting company keeps promises, meets deadlines, and has or can get the necessary equipment and cash to complete future contracts.
3. Work with your surety agent to supply additional information if requested by the underwriter, and sign an indemnity agreement if requested. Once you receive your first surety bond, keep a good relationship with your surety agent. Surety bonds for future jobs will be easier to obtain.
