When it comes to running any kind of small business or contract-based company, you will likely need to carry several kinds of insurance, ranging from property to worker's compensation. But there's another type of insurance that can help you out quite a bit when your business is still growing and that is a surety bond. Here's what a surety bond is and how it can benefit you and your company.
What is a Surety Bond
A surety bond is essentially a contract between three entities: your business, your suppliers, contractors or clients, and the surety bond company. A surety bond guarantees that the suppliers, contractors, or clients who do business with you will get paid for their services or products even if something comes up and you can't pay them yourself.
For example, if a materials company is providing you with construction supplies on a new project, a surety bond will guarantee that supplier that they will receive full payment for the materials even if the construction company runs over budget do to bad weather or an accident on site, etc.
A Surety Bond is Confidence
A surety bond is especially helpful for smaller businesses because they will let bigger suppliers or business to business companies know that it's okay to do business with you. Sometimes, working with a smaller business can come with higher risks, but a surety bond can instill confidence in everyone you are working with.
A Surety Bond Can Make You More Competitive
If there is a supplier or contractor you want to work with, but they only work with a set number of companies every year or month, a surety bond can make it more likely that they will want to include you on their list of partners. Being 100 percent confident that they will get paid can go a long way towards viewing your company in a positive light. This will allow you to get aggressive in your business deals and make you more competitive as you fight it out with others in your industry for a limited number of materials, supplies, or resources.
A Surety Bond May Be Required
If you run a construction company and want to get involved in government contracts, you should know that there are sometimes legal requirements when working with the U.S. government. If a specific project is over a certain amount of money, the government may require the winning bidder to get a surety bond for the project before they will hire you.
Contact a company such as NFP, P & C, Inc. for more information.
