Why You Need Surety Bonds for Your Business |
Posted: July 1, 2016 |
A surety bond is a three-party agreement by which the surety guarantees to the obligee (project owner) that the principal (the contractor) has the ability to perform the contract as stated in the contract documents. As a matter of fact, these bonds are a more effective and reasonable way for financing contract security obligations, which replace the need to allow the use of cash or other forms of security for performance obligations under a contract. Well, most small companies in the United States would express a need to own a surety bond so they can do business legally. There’s no doubt about the fact that bonds play a crucial role in your business by keep it financially secure and creating much needed trust when dealing with prospective clients. Surety bonds are the ones which are legally required by states for certain industries. If you’re a contractor, surety bonds will prove beneficial to you in every sense of the word, because they guarantee that the job will be accomplished as per the terms of the contract. How surety bonds are beneficial to contractors? Here are unique benefits provided by these bonds:
Know that a surety bond is a mandatory requirement for any federal contract exceeding $150,000, according to the U.S. Small Business Administration. The business is required to issue bid, payment and performance bonds when it comes to bidding for bonded contracts from government private entities. While a bid bond guarantees the acceptance of the bidder of a contract’s terms and conditions, a payment bond gives assurance that the payment of the supplier will be honored. And last but certainly not least, a performance bond secures the successful completion of the contract as per the required standards.
Source: Blog
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