Contractor bonds are a must-have if you want to do business in the construction industry. And if you think you only need a bond for a major public project, you are mistaken. Whether you specialize in the private or public sector, contractor bonds are an important part of building a sturdy business.
Surety Bonds: The Basics
A surety bond is an agreement that you will fulfill your contractual duties. If you fail to perform your duties as contracted, then the surety company who issues the bond will compensate the project owner so they can find another contractor, and don’t suffer financial losses.
The Benefits of being Bonded
When you are bonded, you demonstrate to potential customers that you are a contractor with a track record of doing things right and fulfilling your obligations. You can promise your customers that you guarantee to do your job correctly all day, but a bond is guarantee that backs up your promise.
Certain bonds are required by the state if you want to do business, and others may be required for a certain project. Whether they are required or not, all bonds make you a more desirable candidate to homeowners and project owners.
Types of Contractor Bonds
Here are the bonds that will help you grow your business, and the individual benefits you get from each.
Contractor license bonds provide a guarantee to the state that you will follow the law and not violate the rules and regulations of your contractors license. Most states require you to carry a license bond if you want to do any kind of business.
Contractor bid bonds provide a guarantee to a project owner that you will honor your bid if they select you for the project. Contractor bids bonds can help limit the bidders on a project to only the most responsible and qualified, which benefits both the project owner and the contractors who want the project.
Contractor performance bonds provide a guarantee that you will complete the project according to the contract. You guarantee to follow the plans and finish the job. If you fail to perform as contracted, the project owner can file a claim and replace you with another contractor who will. When you carry a performance bond, homeowners and project owners know they can count on you to do what the contract says.
Contractor payment bonds provide a guarantee that you will pay your material suppliers, subcontractors, and laborers. A payment bond protects the project owner from facing liens on the property, or having to foot the bill for unpaid labor and materials.
A payment bond makes subcontractors and suppliers more likely to work with you, knowing there is a guarantee that they will get paid on time. The benefits of a payment bond also protect your reputation in the industry if the unthinkable happens and you can’t make the payments you owe.
Don’t limit yourself to a state-required license bond. When you are fully bonded, you are ready to take on any project. You stand above the un-bonded competition, and get to bid on the best projects. Vendors, suppliers, and subcontractors are more than willing to work with you, and best of all, you have a guarantee that backs up your promise of excellence. Contractor bonds are a simple tool that can take your construction business to the next level.