For beginners in the construction industry, getting a contractor bond can be a hassle due to the complexities involved. Going through this process without a good understanding of what the process entails can lead to costly mistakes which you can’t afford to make when growing your business. To help you out, here are five things you should know about a contractor bond.
1. These bonds are tied to your creditworthiness
Your creditworthiness plays a huge role in determining whether you will be bonded or not. For small projects, it is your personal creditworthiness that is checked, while for larger projects over $350K, it’s your company’s creditworthiness. As such, before you start the process of getting bonded, ensure that you have your books in order. You can do this by checking your credit rating with the various credit rating companies in the market. You can also improve on it by paying any outstanding loans on time.
2. There are companies that can help out with the process
While the process of getting a contractor bond is not easy, you can always seek help from professionals who are specialized in this area. Such professionals not only can help you get a contractor bond quickly; they can also handle some of the issues that can prevent you from getting this bond. Take contractor bond for example. This organization can help you get a contractor bond within a day. They take it a notch higher and can help you get it even when your personal credit is not that good.
3. There are different types of contractor bonds in the market
When applying for a contractor bond, make sure that you understand the different contractor bonds that are available. In specifics, they are categorized into bid bonds, payment bonds, performance bonds and supply bonds. The bond you go for is dependent on the job. For instance, if you are aiming to supply materials, then you need to apply for a supply bond. On the other hand, if the contract involves lots of human labor, especially semi-skilled labor, then you need a payments bond. You need to be clear about what you are applying for.
4. Your work experience counts in determining your bond rates
Just like your credit score has an impact on whether you will get a contractor bond or not, your level of experience in the industry plays a role in determining the rates you get charged for the bond. The more experience you have in the construction industry, the lower the rates you have to pay for contractor bonds. That’s because if you have experience, you are deemed trustworthy by bond providers.
5. You need one for public projects worth over $100K
Before you get a contractor bond, ensure that you understand the laws governing them. As a matter of law, you need a contractor bond for any public project that is worth over $100K. If you are bidding for a private contract, you don’t need a contractor bond, unless the company you are bidding for asks for it.
