Does It Matter Where I Get My Performance Bonds?

A performance bond can be a necessary surety bond to have whether the construction job is private or public, and a contractor has a few options to choose from when needing to get a performance bond for the project. While it may not seem like an important decision to make, where you get the performance bond, it would be a mistake to seek the bond from a business just because they are able to issue it. 

In this article, we’ll discuss each option you have to get a performance bond before explaining the best option for your surety bond needs. First, let’s briefly refresh you on what a performance bond is.

What is a Performance Bond?

A performance bond is a type of surety bond that acts as a guarantee to the project owner. The bond ensures that the work performed will meet the contractual obligations agreed to between the owner and the general contractor. Performance bonds can be required for private construction jobs and are required by law for public ones, so it’s important to be familiar with the bonding process to make sure you get the performance bond with little hiccups or bumps in the road. 

Depending on the size and circumstances of your performance bond request,  having your internal financials prepared correctly, or by a CPA with construction accounting experience, and documents that detail your business experience as a contractor could be very helpful. Depending on the size of the performance bond needed, the records a surety company will need to review are:

  • Performance bonds less than $750K: A simple one or two-page application based on past experience of similar sized jobs and a strong credit score.
  • Bonds between $750K to $1.5 million: Financial statements from the company and owner are needed.
  • Performance bonds over $1.5 million: This is where a construction-oriented CPA becomes essential and a contractor should provide reports that allow the surety to track job performance

Now, for where to receive a performance bond a contractor has a couple options:

  • An insurance agent
  • A surety specialist

These options detailed in the sections below:

A Performance Bond from an Insurance Company

An insurance company can issue a performance bond, requiring all the same documentation as listed above. The issue with going to an insurance agent to get a surety bond is that they lack the professional expertise and experience to know the nooks and crannies of the bonding process. An insurance agent wouldn’t have the same relationship with a surety provider in order to match your bonding needs with the appropriate surety company, risking being denied the performance bond. Another problem with going to an insurance company is the lack of knowledge on how to best prepare for the size of the bond you need, unable to give direction or a structured map to grow your bonding capacity. 

Yes, you can get a performance bond from an insurance company. It isn’t the best option considering the lack of surety experience and the lack of professional connections that make the bonding process easier and securing the surety bond more likely.

Performance Bonds from a Surety Specialist

Working with a surety specialist to get a performance bond means working with someone whose entire professional life is dedicated to surety bonds. They have developed the necessary relationships with surety providers, often having access to special programs and other professionals that can further assist in the bonding process, like a construction-oriented CPA. They also have an interest in seeing your company succeed rather than only minimizing the risk of a claim being filed against the performance bond. A surety specialist can help you lower premium payments, and help structure and prepare you for greater-sized bonds, both requiring efforts that lead to a more successful contractor business.

Does It Matter Where You Get a Performance Bond?

Depends on what your goal is. If the only aim is to get a performance bond for a job, then you’re free to choose an insurance agent or surety specialist for your bonding needs. Where you get a performance bond matters if you’re taking advantage of the opportunity to better your business through the bonding process and want an easier time getting surety bonds in the future. 

We at CSBA are well versed in guiding both newer and seasoned contractors to grow their bonding capacity and gaining the surety bonds they need for the jobs they want. With over 200 years of experience, we have the key relationships that can make all the difference in bonding. When a contractor needs to get a surety bond, whether a performance bond or bid bond, or other surety bond types, it’s an opportunity to partner with someone who can help provide guidance. That’s why it matters where you get a surety bond.

Dan Huckabay
About The Author

Dan Huckabay


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