Up to $2,000,000 Single Bond Capacity now available!
Contact us for more information on these Contract bonds with collateral assistance programs. $2,000,000 Single bond capacity possible, up to $7.5 Million Aggregate limit.
Performance/Payment/Contract Bonds
Programs available to approve almost any size or type of contract bond, even with poor credit or new in business. Collateral required.
Quick N' EZ Single Bond Application
For bonds $250,000 or less, Quick N' EZ program available with only limited underwriting and qualification needed. Possibly no collateral, based mostly on credit.
Surety Bonds
Contract surety bonds are an effective tool for shifting the risk of subcontractor failure to a surety company or companies. Surety bonding is a careful, rigorous, and professional process in which surety companies prequalify the subcontractor, providing the general contractor the assurance that the subcontractor will perform according to the terms and conditions of the contract. This essential assurance is provided by the performance and payment bond. The Performance Bond protects the general contractor (obligee) from financial risk should the subcontractor default or fail to perform the job according to the terms and conditions of the contract. The Payment Bond guarantees that the subcontractor will pay laborers and suppliers associated with the project.
Construction is a risky business. In spite of their prequalification efforts, surety companies paid out $514 million in losses last year alone and over $7 billion dollars since 1985! These losses would have otherwise been borne by general contractors- and in some cases, by owners if they led to default of the contractor.
Many sureties encourage, or may even require general contractors to bond subcontractors, especially on large, complex projects or one where a few subcontractors represent proportionally large or critical segments of the work.
Sureties favorably view general contractors who have an established policy of bonding subcontractors over a certain threshold. Of course, this is only one of many underwriting considerations, but it can be a very important one when the surety is asked to consider a stretch situation. Does the subcontract bond reduce the general contractor's bond exposure on a dollar-for-dollar basis? Keep in mind that each bond is specific to a contract. The general contractor's bond is specific to the subcontract. Therefore, in the eyes of the general contractor's surety, there is no such correlation. The general contractor and his or her surety are still obligated to the owner for the terms and conditions of the general contract. The owner is not a party to the subcontract and does not benefit directly from the subcontract bond.
Many general contractors, especially larger companies managing numerous projects with several different subcontractors, have an established subcontractor bonding policy. The most common thresholds are $50,000 to $100,000 with exceptions to meet the realities of the marketplace. On hard-bid public work projects with listed subcontractors, the low bidder often must list subcontractors that may be unable or have limited capacity to provide subcontract bonds. Other considerations, such as type of work, duration of the subcontract, bid spread, size, financial strength, and reputation may provide reasons to waive the requirement for subcontract bonds.
But size alone is not a reason to waive subcontract bonds. Many large, well known contractors have failed. A little research may uncover important information about the financial condition of the subcontractor. Your professional surety agent is an excellent source of information about subcontractors and their ability to provide bonds.
If you are in need of any information not listed here, please visit our Frequently Asked Questions page, or Contact Us and we will be happy to assist you with any information you need.
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