What are the Types of Surety bonds?

The three most common types of surety bonds are: Bid Bonds Performance Bonds Payment Bonds

Are Surety Bonds paid monthly?

No. You don't pay month-to-month for sureties. When you are quoted a price for a surety bond, you make a one-time payment.

How do I apply for a surety bond?

Applying for a surety bond, no matter the sort of bond, is to contact a surety agency. For instance, you can reach CSBA here to get started on obtaining your surety bond.

What is a payment bond?

A payment bond ensures that all of a contractor’s laborers, subcontractors, and suppliers are paid on a particular project.

Who requires payment bonds?

Payment bonds are required on almost all public projects. General contractors sometimes require them of their subcontractors, and occasionally private owners will require them.

Who pays for a payment bond?

The contractor, or principal, purchases the bond and pays for it.

Do Payment bonds expire?

Payment bonds expire after the project is completed and statutory timeframe have lapsed.

What is the difference between a surety bond and a payment bond?

A payment bond is a type of surety bond. The only real difference is the qualifying term, in this case, it's "payment" and only notes what sort of surety bond it is.

What does a performance bond cover?

The performance bond covers the owner of the project against losses if the contractor fails to deliver on the project within the contractual provisions.

How long does a performance bond last?

Since performance bonds guarantee the completion of the contract, they last until the project is finished along with any required warranty period included in the agreement.

When can you release a performance bond?

Usually, a performance bond is released when the project is completed, though some public projects stipulate that a contractor gives a warranty following completion that the performance bond covers.

What is the difference between a performance and a payment bond?

We have a detailed article that explains the differences here , but the short answer is that the performance bond secures the contractor's promise to complete a job within the terms and conditions outlined at the agreed price while the payment bond protects subcontractors, vendors, and laborers against nonpayment.

What is the difference between a bid bond and a performance bond?

Bid bonds are required when contractors bid a project and guarantees if they are low bidder, they will enter into the contract and provide any required performance and payment bonds. Performance bonds guarantee the actual performance of the work to be completed by the contractor according to the terms of the agreement. What happens to a bid bond after a contract is signed? The bid bond is replaced by a performance bond if the bid is accepted and the contractor enters into a contract with the owner or general contractor.

Surety Success Story:Force Demolition, Inc.

Longtime industry veteran, Duane Pate, started Force Demolition, Inc. from his house in 2019 with some capital and a dream. Duane recalls, “I remember obsessing over every detail about getting the business up and running. I thought through the guys I would have in the field, who could help me in the office, and how I was going to fund everything, but I had never dealt with surety bonds, so I wasn’t sure what to expect there.”, Duane recalls. “Dan at Commercial Surety Bond Agency met me for lunch, we went over my business plan in detail, and he walked me through the whole bonding process. He had their controller set up my accounting, helped me pick the accounting software to use, and introduced me to my CPA. It was like every area I was clueless about, they just walked me through it and put all the pieces in place.”

Duane goes on to say, “I knew we were going to have some big project opportunities come our way, because of some strong industry relationships I have. Dan kept telling me to just do the things he suggested with setting the business up properly and go out and make money, and he would take care of the bonding side when the opportunities came up. We started bonding some smaller jobs and doing well, and just as I expected, 18 months after starting, I got a huge opportunity with one of my large GC’s to bid a $10 million job at LAX. I had done tons of projects there in the past, and we had everything we needed to be successful…except we needed the bonding. I went over my gameplan with Dan, and he got it immediately. He fortunately has some high level connections at the surety, and was able to not only get the local manager out to meet me but also the top guy in the corporate office to fly out. Long story short, they approved the bond, and the project has gone amazing. Dan kept his promise, and it took my company to another level.”

Duane sums it up by saying, “All I know is that the team at CSBA are rockstars. If you want to grow your business, you need to call these guys.”

Today Force Demolition has over $25 million in bonding capacity.