Types of Surety Bonds for Your Small Business
The surety bond acts as a safety net for your clients. It means that they’re reimbursed should you fail to deliver. But does it benefit you too?
Oftentimes, clients require surety bonds to reassure them of reimbursement in case something happens later on such as failure to complete the project, failure to follow regulations or failure to follow the terms stipulated in the contract. It may be difficult for you to pick which kind of bond you need for your business.
Why get surety bonds?
The bond does not protect the business, rather it protects your clients. It’s an assurance that the business will do the job. For businesses, the bond is how they’re able to show that they are held accountable and reliable for their actions. When clients are looking for businesses to partner with, they will likely choose a business with surety bonds. It gives them peace of mind knowing that they won’t lose money.
While it’s not required, your bond serves as an edge over your competition. It shows that you are reputable, responsible, and trustworthy. These are factors that help clients decide on which businesses they want to work with.
Types of surety bonds
To date, there are over 20,000 kinds of surety bonds. You don’t need all of them to help your business but there are common surety bonds that most small and large businesses get to protect their customers.
Contract Bond
A contract bond is a guarantee that all the terms of the contract are fulfilled. If the terms aren’t met, the contract owner can claim the bond to recover from financial loss. Contract bonds are typically required by government agencies for construction projects. The total cost of the bond depends on the contract amount. It’s always somewhere between 1% to 3% of the total contract.
Commercial Surety Bond
This bond protects the client or consumers from fraud and misinterpretation. Commercial surety bonds usually cost somewhere between 0.5% to 3% of the bond obligation. Most private owners use commercial surety bonds for contractual obligations.
License and Permit Bond
License and permit bonds provide customers with a safety net when businesses fail to comply with the laws of the land. All the states require businesses to have a bond and a license from their local authority. The bond acts as proof of legitimacy, trustworthiness, and that the business complies with the codes required by the local government. It’s a necessary part of any business as people choose to work or partner with licensed parties.
Are you looking for the best bond insurance for your business? Look no further. The London Insurance Agency & Insurance Service Center provides you with the right solutions. We specialize in several types of bonds for small and large businesses including contract bonds, subdivision bonds, commercial surety bonds, license and permit bonds, and court bonds. Call us today with your questions and we’ll get back to you in no time. You can also email us and get connected.
