Performance bonds are required by the developers as these bonds ensure that the contract will be completed propitiously. Winning a contract bid is not sufficient. The construction projects involve huge investments. If the bid winner refuses to take up a project or is not able to deliver the desired performance, there can be huge losses not only to the developer but also, to the general public and the government.
If the contract is secured by a performance bond then a claim can be made by the developer and the loss can be compensated by the performance bond companies. It is one of the most common bonds used in the Construction industry today.
How is rate decided?
The premium on the performance bond varies depending upon the bid amount, financial credentials of the applicant and his past work history.
Contractors typically pay a rate that’s just 2.5%-3% of the bond amount. This means if you’ve been contracted for a $100,000 project, you could pay just $2,500 to $3,000 for your performance bond.
Other things such as longevity of company’s existence, whether the applicant has been bonded before or not, and the personal credit will also determine the rate of the performance bonds.
You can apply for Performance bonds with us. Your application will be reviewed by our team and you will be issued a bond in no time.