What are Surety Bonds and How Do They Work?

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2021 promises to be banner year for Florida’s transportation and infrastructure industry with the State Transportation Work Program. This program includes vital funding to increase infrastructure capacity, new highway construction, bridge repairs, and seaport, aviation, and transit program improvements. As a result, the need for obtaining Surety Bonds will  be greater than ever.

Surety Bonds perform an essential role in the construction industry. A Surety Bond is a three-way contract between the surety (the company providing the bond), the principal (the contractor) and the obligee (the project owner). The principal usually applies for the Surety Bond with the surety and it is to protect the obligee’s interest.

A Surety Bond is simply a three-party agreement or contract where the first party, the surety, guarantees the performance of the second party, the principal (contractor), if they default on their obligation to the third party, the obligee (project owner).

The reason Surety Bonds work so well is simple. They help to take the risk out of a risky business. Surety Bonds are designed to protect your interest from the actions of a third party.

Types of Surety Bonds.

There are variety of Surety Bond types designed to meet your needs. In fact, almost any contract or obligation can be bonded. The four most common types of Surety Bonds include Contract Surety Bonds, Commercial Surety Bonds, Court Surety Bonds, and Fidelity Surety Bonds. But, for this article, we will focus on the most common bonds used for road and highway work – Contract Surety Bonds.

Contract Surety Bonds

In the construction industry, the most common bond types are Contract Surety Bonds. They include Bid Bonds, Performance Bonds, and Payment Bonds. All are needed for different purposes to ensure that the interests of the obligee are protected, especially if the principal fails to meet the terms of their contract.

Bid Bonds financially protect an obligee if the bidder awarded the contract fails to sign the contract and fails to provide the essential Performance and Payment Bonds.

Performance Bonds, on the other hand, are put in place to protect the obligee from monetary loss if the contractor fails to deliver the job according to their agreement.

Payment Bonds are there to guarantee that the contractor is going to pay the workers, subcontractors, and material suppliers involved in the project.

A Contract Surety Bond protects the project owner by guaranteeing that the contractor will follow the specifications and perform the work laid out in the construction contract. It also ensures that certain labor, materials suppliers, and subcontractors will be paid.

What Do You Need for a Surety Bond?

Before you apply for a Surety Bond in Florida, make sure that all your documents are in order so that you can expedite the whole process. Essential documents include:

Financial Records: Surety companies will ask for both personal and business records. For businesses with less than $20 million in sales, you will need to provide financial statements for the last year and for the interim period in this year, most recent personal and corporate tax returns, financial records of majority shareholders, and a bank reference letter. Companies with more than $20 million in sales need to show their audited financial records.

Resumes: Some surety companies may ask for resumes of key personnel. Make sure to highlight any relevant experience.

WIP Form: WIP stands for “Work in Progress” form. Ask your surety company for the relevant form. This details all the projects you have completed recently, ongoing work, and any outstanding surety.

Insurance: Some surety companies may insist on work insurance to see that there are no uninsured liabilities.

References: Companies issuing Surety Bonds in Florida will ask for references from associated parties, such as past clients, suppliers and so on. The references are an indication of other’s trust in your ability.

Apply for a Surety Bond Online:

Surety Bonds are usually required for contractors to work on projects. Without it, a contractor might not be able to work with project owners, workers, and material suppliers. These are the people who play a significant role in the successful completion of contracted jobs. Surety Bonds protect project owners if the principal does not fulfill their obligations per the terms of their agreement.

With a new administration also proposing to make “historic investments in infrastructure”, there should be plenty of new projects in 2021 and numerous contractors bidding on these projects. With Surety Bonds usually required to even start the bidding process, you must find a reputable Surety Bond company to apply with – one that has a strong reputation and is an industry leader. Before choosing a surety company, make sure they have the available resources to support the project you are bidding on.

But obtaining a Surety Bond can be a grueling, time intensive process. That’s why more companies turn to America’s number one provider of Surety Bonds, Nielson, Hoover & Company. To learn more, call 305.722.2673.

Contract Surety Bonds and How They Benefit the Contractors

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Surety bonds are an integral part of every corporate transaction. They are an assurance that the chances of any default ever happening will be very limited. Contract surety bonds in Florida also assure the contractor that he will have more opportunities than everyone with no bond to win the contract. With a bond around, the project owner is assured that he will never make any loss by hiring the said contractor.

But that’s just the gist of how surety bonds work. Winning more contracts than everyone else is not the only benefit for contractors. There are many other benefits for contractors too, such as:

  • They can access contracts not just locally but well beyond the boundaries of the state (and even country)
  • They can continue accessing their own funds without any additional burden of bank credit facilities
  • They have a bond that assures project owners of their financial stability without having to saying it.

Contract surety bonds in particular focus on the projects related to the construction industry. This sector not only needs business association between contractors and project owners, but also between contractors and their suppliers, contractors and sub-contractors, and more. All of these relationships can seek coverage under a contract surety bond. Those who have good financial position will have no trouble obtaining the bond. Those who have a shady past record will not be able to get the bond in the first place. This makes every transaction under a bond as secured as it can be.

Contract surety bonds can be significantly customized to suit your need. You can discuss your expectation with the surety company while pursuing a bond. They will run a check on you before sharing the best surety bond you can aim for. Always ensure that you consult them before seeking a surety bond.

Call your nearest surety agency today to get started.

Different Categories of Commercial Bonds that You Should Know Of

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Private and government contracts work in different ways. While it may be less troubling for you to secure the contract of a private project, any public commercial contract needs more scrutiny. This is what makes it important to secure commercial surety bonds in Florida. These bonds are more detailed than other surety bonds. These details make them more dependable and commercially viable for large-scale projects.

Just like any other surety bond, these bonds secure the obligee if the contractor defaults on an obligation. Only leading surety agencies must be trusted here so that you can be certain that they can and will pay if a default happens despite all checks.

Commercial surety bonds are themselves a broad category. These bonds have many sub-categories as well, such as:

License Bonds: Government divisions like municipal committees and divisions working on state laws seek these bonds. Those who seek a license from these government entities have to furnish this bond type before starting their operations.
Mortgage Bonds: Those issuing mortgages have to obtain this bond to ensure that they will lend finances in line with the state regulations. U.S. Department of Finance is generally the one needing this bond before issuing their consent.
Subdivision Bonds: Those selling real estate properties have to obtain this bond. Through this bond, they ensure the development authority that they will install all utilities around every house in compliance with the state laws.
Reclamation Bonds: These bonds primarily secure the environment. Anyone using a piece of land for any type of use has to obtain this bond to assure that they will clean and restore the land after they have completed their purpose.

Do you want more details about how you too can benefit from commercial surety bonds? Then contact your nearest surety agency for the same today.

Everything You Should Know About Judicial Bonds in Miami

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A court case involves two parties contesting their claims in front of a judge. The outcome leads to the judge asking one of the parties to fulfill an obligation. But what happens when that party backs out? What if they do not honor their word? That will surely create a mess. Thankfully, there are judicial bonds in Miami that can avoid that from happening.

How Does it Work
People contesting a case have to obtain a judicial bond that binds them to follow through with their obligations. If they don’t do so, they forego their right on the payment made on securing the bond. Moreover, the outcome may also turn out against them. Courts mandate these bonds themselves, so that their time is also not wasted and those contesting a claim can come to a satisfactory conclusion.

How to Obtain Judicial Bonds Miami
Judicial bonds are a kind of surety bond. So, just like most of the other bonds, you have to undergo a screening by the surety company before you get the bond. Your personal and financial history will be taken into account. You will also have to pay a percentage of the bond premium before the bond is issued to you.

The amount you need to pay to obtain a judicial bond will depend upon your past record. If your financial standing is strong and you have never defaulted on similar bonds before, you would have to pay a smaller percentage of the total amount. If you have defaulted before, then the payment you have to pay can even go up to the full value of the bond.

Always make sure that you choose your surety bond from a leading surety company. Ask them questions if you have any before procuring the bond. Get in touch with our team today to get your judicial bond.

 

How Bid Bonds Secure a Real Estate Transaction on Their Own

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Every construction project begins with the contractors bidding for it to win the contract. But what happens when the winning contractor backs off? That surely leads to losses for the project owner, who loses both time and money. This is why he needs some kind of assurance from the contractor so that he does not experience any loss.

Bid bonds Miami work as an assurance that the work will be completed as agreed. These bonds also help the project owner identify the contractors who have sufficient capital at their disposal to complete the work. This way, bid bonds also help to filter out all those contractors with high risk in the beginning itself.

What Makes Bid Bonds Secure
Companies that issue bid bonds keep their risk factor minimal. They ensure it by reviewing the applicant thoroughly. They assess the financial capability, as well as past performance, before setting the bid bond value. For some, the risk may be as low as 5%, for others, it can be close to 100%.
Bid bonds rarely come into play in real life. Any contractor who puts his money on the line by applying for a bid bond will never want to lose his deposit. This way, bid bonds also work as a deterrent against siphoning off any money. In the end, it’s a win-win situation for everyone.

Buy Yours from a Proven Company
A surety company issuing the bid bond has to be a proven name itself. They must understand the risks involved and should have the capital to make a payment if the same is required. With the right company at your side, you will have little to worry about. For more details, speak to your nearest surety company today.