Frequently-asked questions
Performance, payment and service bonds are vital to the construction and service industry. They act as insurance for the project owner that you can complete the project and honor all your financial obligations. Knowing what bonds are, how they work and how to use them can be very confusing for business. That’s why we are happy to provide a list of frequently asked questions about performance, payment and services bonds along with a broad variety of other bonds you might need to further your success in business.
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[su_spoiler title=”1. DOES MY COMPANY QUALIFY?“]
We can generally answer this question when we receive three items: Contractor’s Questionnaire, Corporate year-end Balance Sheet and P&L, and Personal Financial Statement for all owner(s)/spouse(s). We will eventually need the balance of the required information. However, these three items cover the primary qualification.
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[su_spoiler title=”2. WHAT SIZE CONTRACT DO WE QUALIFY FOR?“]
There are multiple answers for this question. Some deal with the size of your company’s largest completed project. There are surety programs that, with proper documentation, may allow approval to bid projects anywhere from 1.5x to 3x larger than your largest completed project.
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[su_spoiler title=”3. HOW QUICKLY CAN OUR COMPANY COMPLETE THE PROCESS?“]
After we receive all required documents in-hand, we can process the application with the surety and respond to the contractor within 48 hours.
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[su_spoiler title=”4. WHAT IS THE BEST METHOD TO CONTACT NATIONAL SURETY SERVICES?“]
Give us a call, we’re old school. Call 800-953-6699 or 770-394-9444. Just ask for someone to help you with a bonding question.
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[su_spoiler title=”5. WHAT IF THE OWNER(S)/SPOUSE(S) HAVE POOR PERSONAL CREDIT?“]
We can generally answer this question when we receive three items: Contractor’s Questionnaire, Corporate year-end Balance Sheet and P&L, and Personal Financial Statement for all owner(s)/spouse(s). We will eventually need the balance of the required information. However, these three items cover the primary qualification.
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[su_spoiler title=”6. WHAT IS A BID BOND?“]
It is a written guaranty from a third party guarantor which is usually an insurance (surety) company. The bid bond is submitted to the project owner by a contractor (bidder). The bid bond ensures that if the project owner accepts the contractors bid (usually the low bid), the contractor will proceed with entering into the actual contract with the owner, provide all required insurance coverage and will replace the bid bond with a performance and/or payment bond. If the contractor (bidder), declines to enter in the contract or is unable to satisfy any of the contract requirements, it opens the possibility of the surety paying the project owner the difference between the contractor’s bid and the next highest bidder subject to the penal sum of the bid bond.
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[su_spoiler title=”7. WHAT IS A PAYMENT BOND?“]
A guaranty issued by an insurance company (Surety) that assumes all liability that the contractor will pay all its employees, suppliers, subcontractors, and others creditors on time and in full. In many situations second and third tier vendors and subcontractors are also guaranteed under this bond. These are also referred to as contract payment bonds.
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[su_spoiler title=”8. WHAT IS A PERFORMANCE BOND?“]
A written guaranty issued by an insurance company (surety) that guarantees all the provision of the contract and all items pertaining to the contract. A performance bond ensures payment of a sum (not exceeding a stated maximum) to the project owner should the contractor fail in the full performance of the contract. Performance bonds are usually issued in the amount of 100 percent of the contract price.
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