We all know the importance of being bonded as a contracting business. It’s a safety blanket for you and for your principal in case things go bad on the job. It’s a sign of confidence that you have the ability to stand behind your word and your work. It’s a good faith manner of binding you to the principal and ensuring that all contractual obligations are met.
Different bonds, however, will carry different premiums, and it can help when budgeting for your bonding process to know the things that will affect this premium. Explore some of the most significant and important factors that go into determining how much does a surety bond cost, and where to find help getting bonded.
How Much Does a Surety Bond Cost?
You’re not the only business owner who has wondered how much does a surety bond cost. The truth is, there are many factors that go into the premium, and two different companies pursuing the same bond could pay different costs for it. These factors include the type of bond, government agency variances, your company’s credit records and finances, and your need for financing.
Type of Bond Pursued
Individual surety bonds can have greatly variant costs based on the bond type you’re pursuing. Notary bonds, for example, might only cost about $100, while a multimillion dollar performance bond for a government project could run tens of thousands of dollars. Usually, a surety bond’s premium will be valued at a percentage of the type of bond, which can vary based on the risk factors involved.
Government Agency Variances
Usually, you will be pursuing a bond because you’re required to by a government agency as part of getting licensed to bid on a big public job. Every state enforces different regulations, with these state laws outlining the exact bonds required for different jobs. Some laws might allow bonds to vary widely on each individual case. Contract bonds, for instance, are almost always valued on the size of the bid, while commercial licensing bonds may be standardized in cost.
Credit Score and Finances
Just as with any loan (which is really what a bond is—a pre-guaranteed loan), a surety bond is granted based on your credit rating. The surety company will put you through a background check which helps them determine the appropriate rate to charge. They’ll look at your financial records, work history, credit review and bond history, among other things.
The Need to Finance the Bond
Many businesses don’t have the money up front to pay the premium for a bond, which creates a Catch-22. You need the bond to bid on a project to make money, but you need money to pay for the bond. It’s possible in some cases to finance the Premium and pay over time, but you will pay more in the long term as a result.
Easy Surety Solutions
Your best first step in getting bonded is to reach out to a respected bonding agency like NSSI. For over two decades we’ve helped businesses of all sizes get bonded fast and easy, and we’ll do the same for you. Get in touch with us for more information about how much does a surety bond cost today!