As an entrepreneur looking to make a mark in the corporate world, you need to stay on top of your game.
From obtaining your practice license to meeting Government’s regulations relevant to your industry, there are quite a few factors you need to take care of before you launch.
One of these aspects (that sometimes tends to get overlooked) is surety bonds. Let’s take a look at what they are and why they can be so important for a startup:
How Surety Bonds Work
Surety bond is a legal contract that protects a business’s customers. There are three parties involved:
- Principalis the business – that is you. This entity is required to obtain a bond that guarantees a reasonable level of performance under terms set out in the contract.
- Obligee is an entity that requires the principal to obtain the bond. Generally, this entity is a Government institution.
- Surety is an agency that sells the bond to the business. This is an entity that would prepare the terms and conditions of the surety bond. In cases of default from the principal’s side, the surety company provides their clients the agreed-upon compensation.
Who Needs Surety Bonds
Surety bonds are relevant to a wide variety of fields and industries. Here are some of them:
- Health clubs,
- Travel agencies,
- Car dealers,
- Notary public, etc.
Why You Should Have a Surety Bond
Here are some reasons why you should obtain a surety bond:
- Sometimes, you are legally required to get a surety bond. This means that you won’t be able to attain the license or permit until you have a surety bond.
- It provides you credibility. Your customers will be more comfortable working with a bonded company. This shows that you are willing to take the heat if things do not go as planned.
- It also portrays financial health of your company.
How to Obtain a Surety Bond
Surety companies and insurance carriers can issue surety bonds. The process involves underwriters assessing your financial status. They would be looking at credit reports, bank statements, etc. and then prepare your application.
You, as an entrepreneur, will be required to pay a bond premium. This amount is around 1 to 3 percent of the total bond amount.
However, if you have had an uncertain financial history, you might be required to pay more.
We at BondPro help entrepreneurs obtain bonds without any hassles. Working in the industry for so many years, we have acquired the right contacts to help entrepreneurs get affordable prices. From maintenance bonds to performance bonds, we help businesses with all kinds of commercial surety bonds.