The Importance of Surety Bonding In Construction
Surety bonds are very important to any contractor because it increases the credibility of the contractor financially. There are different types of Surety bonds. They include Bid, Performance, and Payment bonds. These bonds are basically contracts of assurance that the guarantor will pay for a significant amount of money to the obligee (the receiving party) should the principal (the person or company who is supposed to meet the conditions of the contract) fail to meet his or her obligations. It's very similar to an insurance contract in such a way that it assured that the oblige with receive compensation even if there is a failure on the principal's part.
There are a lot of producers of Surety bonds offering aid to contractors who may be a bit short or unstable financially. With the sheer number of surety bond companies, however, the choice can be a very daunting one. Below are things to look for in any company offering surety bonds.
The willingness to underwrite should be there. Contracts are very complicated legal matters. Underwriting a bond, especially when it comes to Bid, Performance, and Payment bonds, are best left to a legal counselor. If you were to hire on off the surety company, you may end up spending more. Choose a surety bond producer who is willing to guide you through every step of the way.
The company must understand the necessity for supportive relationships. There must be complete harmony between all parties involved in the drawing up of the contract. A company that understands this is a good one because you can be sure that communication lines are always open, and all the limitations and strengths of the contract can be clearly discussed.
A company that recognizes risk is a good company. Be wary of surety companies who promise you too much. Like a good friend, a surety company offering Bid, Performance and Payment Bonds should be able to tell if a contractor is taking too much risk. At the same time, the company should be completely transparent about this assessment to the principal contractor so that unnecessary risks may be avoided.
The ability to recommend strong credit lines must also be there. Your choice of a surety company should have a network of banks who are willing to extend a strong credit line to their principal contractors. This way, one can be sure that bonds are followed, and that all parties are well compensated for no matter what happens.
The company must have a good track record. While there is certain value to companies who have been in the business for almost a decade, you might just find yourself staring at a gem of a surety bond producer if you can find one with a good track record. You can assess this track record by scouring through forums, or simply by asking another contractor about his or her own experiences with the company. You might find the sleuthing slightly tiresome at first, but in the end, you will thank your lucky stars that you didn't simply jump out to sign up with the closest surety bond provider.
For more information visit http://bondingspecialist.com/
About the Author
Construction Bonding Specialists are dedicated professionals aligned with several Treasury Listed and AMBest Rated markets allowing them to assist with virtually all Bid, Performance and Payment Bonds, Financial Guarantee and Supply bond needs.
Submitted on: 2015-12-04 02:51:24