How to Get Surety Bonds

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Bonds can be classified into two types: unconditional bonds or conditional bonds. Generally, the unconditional bonds are those that are commonly referred to as investment bonds which guarantee the payment upon maturity and which are sold to investors for the government and corporations to raise money. Conditional bonds are often those that are referred to as surety bonds because these are issued by surety companies which guarantee the payment if the bond is forfeited. Here are some steps on how to get a surety bond.

Step 1

Meet with a surety bond agent to discuss and determine what kind of surety bond you need - It is preferable to work with an insurance agent who is trained to sell surety bonds. There are several kinds of surety bonds, there is what is referred to as fidelity bonds which guarantees payment in case of theft or fraud as well as guarantees an employee’s honesty. There is also what is referred to as performance and completion bonds or commonly known as performance bonds which are often used in construction industries to ensure the completion of the work at a particular time, otherwise the bond is forfeited. There is also what is referred to as bid bonds which guarantees that the bid has been submitted in good faith.

Step 2

Where to get your surety bond - Find good surety companies which are usually large insurance companies which would be interested to accommodate you. A surety bond is more of a credit rather than a purchase and the surety must be satisfied through your surety underwriter.

Step 3

Find an excellent surety bond underwriter - A surety bond underwriter is a person who is adept in writing surety bonds and most likely works for an insurance company or a surety company. The purpose of the surety underwriting process is for pre-qualification which requires the presentation of data and response to questions from the surety. The data would consist of financial statements, credit history, organizational chart and resumes of organization heads, audited accounting statements, brief of completed projects, the business plan, and the indemnity agreement. All these pieces of information would be studied by the surety in order to have the satisfaction of knowing that the contractor is on the up and up.

Step 4

Accomplish the indemnity agreement if required - The general trend now is for surety companies to require the principals of the contracting organization to guarantee their company through their assets. Usually, the principals and their spouses or co-owners sign an indemnity undertaking, which means that they subject some of their assets should they fail to perform. The indemnity agreement can be done either on personal assets of the principals or the corporate assets.

Step 5

Keep your commitment to the surety. Not only will this not put you and your company’s assets and reputation in trouble, this will also establish a good relationship with your surety company.

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