As a small business starting out in a competitive landscape, your initial goal is to make sure you start making profits as soon as possible.
However, you also want to give your customers peace of mind—an assurance that they are doing business with a reliable source.
This is where surety bonds come in. They are a crucial element of business licensing, but many starting entrepreneurs do not know about it.
So, What Exactly Is A Surety Bond?
Before you embark on your journey, it is important you understand surety bonds so that you can manage your capital better.
A surety bond involves contractual agreement between three parties. They are:
- Principal: This is you, a business owner, who is required to have the surety bond.
- Obligee: This is the entity requiring you to have the surety bond. Typically the bond guarantees you follow all statutory law regarding your particular business.
- Surety: This is a company that stands behind your promise to comply with the statutes.
In short, the surety bonds are a guarantee that your business is following federal or state laws and legal requirements. In case of any shortcomings or wrongdoings, the public is protected and does not suffer from any financial losses.
What Types of Businesses Need Surety Bonds
Sometimes, consumers are reluctant to trust small companies or home-based companies. The tag of ‘licensed and bonded’ inspires trust and confidence. Any business that intends to provide a service should have a Business Service bond and Fidelity coverage. Here are some business owners who should have surety bonds:
- Real-Estate Agents,
- Medical Equipment Providers,
- Notary Public,
- Travel Agents,
- Health Clubs
- Pawn Brokers
- Private Detectives and Security Guards
- Process Servers, etc.
Premium costs for License & Permit and Miscellaneous Bonds typically have filed rates with the Insurance Commissioner’s office in the respective State. Some premiums are calculated by the surety provider based on your credit scores and the risk factors of your businesses.
How to Get a Surety Bond
There are a few different types of surety bonds. Depending on the type of business you want to start, you may be obliged to obtain one of many different commercial bonds.
A surety agency like BondPro can help you get the surety bond. Many agencies provide an underwriting service that ensures that the process of obtaining a bond is completed without any hassles.
We at BondPro are an online surety bond agency specializing in surety services only. From contract performance bonds to permits and license bonds, we have helped many small businesses thrive in their respective fields. Learn more about our services.