In Construction, a surety bond is a guarantee of performance of a contract or other obligation to the Obligee (Owner, GC), by a third party (Bonding Company) on behalf of the Principal (Contractor). It is a promise to be liable for the debt, default or failure of another.
Additional types of bonds, Commercial Bonds, cover all other situations where a guarantee of performance of obligations is required.
For a fuller explanation, see what bonding is and who it protects.
The turnaround time depends on the type and size of bond and how quickly the applicant can provide the documentation needed for the underwriter to evaluate the risk. For smaller bonds, there are programs that can offer limits up to $3Mil based only on the applicant’s credit score and prior job history. These bonds can be issued in a day or two. Larger bonds and bond lines require more detailed underwriting and can take up to a couple weeks before we have any answer from the underwriter. Once a bond line is in place though, future bonds can typically be turned around in a day as long as they are within the established limits.
Rates vary based on the type of bond, the applicant’s credit rating, financial position, project history and sometimes the state in which the bond is required.
However, more important than the cost is the agent’s and bonding company’s willingness to work with you. When first establishing a bond line, or if you’re looking to increase your current bonding, this should be your primary consideration.
At Dewco Bonds, we take the time to listen, ask questions and to work with you to maximize your current and future bonding capacity. Our goal is to build a long-term relationship and to become a part of your team.
Ask us for an objective analysis of your current bond line.
Bonding is used by the Obligee as a form of security and pre-qualification for performance and or payment of an obligation. In many cases it is required by law for public works projects in order to protect the taxpayers. Lenders may also require projects to be bonded by the General Contractor as well as by key subcontractors.
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