Establishing a Surety Bond Program is very similar to applying for a bank line of credit. The Surety Bond Company will review your business financial and credit history in order to determine what levels of bond credit they will be able to extend. In addition, they will review the personal financial data, as well as their current credit report of each stockholder of the business.

The following lists the basic information needs for their review:

• 3 years of CPA prepared financial statements for your business.
• Current personal financial statement on all stockholders.
• Completed Questionnaire (form available in our Tool Box).
• Current Work-in-progress report (form available in our Tool Box).
• Current Certificate of Insurance.
• Current copies of Bank Lines of Credit or Bank Reference Letter.
• Copy of Buy-Sell Agreement.
• Copy of Emergency Management Plan.
• Bond Request Form (form available in our Tool Box) 

The Surety Bond Company will review all of the information and pull personal credit reports. Upon a satisfactory review, they will establish a Bond Program for your use.

The Surety Bond Company wants to develop a long-term relationship with their clients. Their goal is to fully understand your company and your capabilities in order to support your larger bond requests.

Indemnity

Indemnifying the Surety Bond Company is  the most important aspect of your bond program. 

Providing your indemnity to the bond company is accomplished through your executing a General Indemnity Agreement.

The Indemnity Agreement outlines the responsibilities of each indemnitor and the surety bond company in the event of a bond claim.

The Indemnity Agreement is a very important legal document between YOU and the SURETY BOND COMPANY. It is advisable to fully read the entire agreement and understand your responsibilities.

Bond Participants

Obligee: beneficiary; the one who is protected by the bond.

Principal: performer of the underlying contract or obligation.

Surety: stands behind the Principal to protect the Obligee from actions or non-actions of the Principal.

Types of Bonds

Bid Bonds: Typically 5%, 10% or 20% of the bid estimate. Guarantees bidder will enter into a contract and will provide Performance & Payment bonds.

Performance Bonds: Provides the Obligee protection in the event you do not perform your contract according to the contract terms, plans and spec's.  

Payment Bonds: Provides protection to the Obligee in the event of non-payment to subs and suppliers on a bonded project.

License & Permit Bonds: Bonds that are required by municipalites to perform work in their municipality.

Disclaimer: The definitions provided on this webpage are for a general understanding of surety bonds and the participants. Each bond, on its own, will define coverage afforded in the event of a bond claim, and be subject to the local, legal jurisdiction in which they are executed.