A contract is a legally binding agreement that states that you, as the business owner, will fulfill certain obligations to the client. But what if a contract is not enough on its own?
This is where surety bonds come in.
A surety bond is an agreement that goes a step beyond a simple contract in that it utilizes a third party that vouches for, and becomes obligated to, the service provider being able to get the job done.
Essentially, a surety bond is a guaranteed agreement between your company, the client, and the bond provider.
The bond provider is telling the client that if your company is unable to complete the agreed upon work, someone will be brought in to finish the job. The client can be “sure” of that
Do You Need a Surety Bond?
Think of a surety bond as insurance.
In traditional business insurance scenarios, the insurance provider will cover costs in the case of damage or injuries. Surety bonds work in the same manner such that, if your company is unable to complete the agreed upon work, the client will be financially rewarded and protected.
Many types of businesses can benefit from surety bonds, including those that work on long-term creative projects.
The truth is that, in such circumstance, a clear resolution is not always available when a conflict arises. When hitting such a crossroads, surety bonds can make a big difference in satisfying the client and avoiding a lengthy and costly lawsuit.
How Do You Obtain a Surety Bond?
In the article, “Step-by-Step Guide to Obtaining Surety Bond Insurance,” the author discusses a number of steps that need to be taken prior to obtaining surety bond insurance.
The first step is to ensure that your personal or business credit is at a high enough level to receive a security bond.
You should also have all business information, including financials and safety records, available to present to a potential insurance provider.
From there, you will also need to determine whether paying your premium upfront is the best option or whether making monthly payments works best.
In the end, you may benefit more from speaking with a surety bond expert who can examine your individual needs and make recommendations.
Just as no two businesses are the same, no two surety bond options are the same.
By consulting with an expert, you may be able to save yourself and your company time, money, and headaches in the future.
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About the Author: Andrew Rusnak is an author who writes on topics that include business development and insurance.