For a company to be able to operate in a certain state or city, it will require a surety bond. The requirements for taking one out will vary from state to state.  Most surety bonds are requested in connection with the building industry. Businesses take out bonds to guarantee they will fulfil what they have promised in their contracts. It’s not like a loan where there’s a borrower and lender. There are in fact three parties: yourself, the bond provider and the entity that requires the bond.
The internet is full of information and companies trying to get one’s business, so it can be overwhelming to know how to get the best deal. This article sets out some of the key factors to consider.

Use Helpful Websites

It’s essential to find a bond that matches your particular business. One  way this may be done is by checking out the most often used bonds for your geographical area.
Fortunately, it’s not just a case of looking at seperate websites, e.g. one for each individual bond provider. Some online pages host details of many different companies, so one can make helpful comparisons. When looking at this site, it was useful to see that the company worked alongside individuals to ensure they made the best decision. It’s also helpful when there are additional articles, such as recommendations for small businesses making professional bids, or different contract types for use when working for the federal government.

Underwriting Questions and Financial Considerations

Bond suppliers ask for basic company information, such as the name and address. If a previous bond was taken out, the license number will also be required. Applicants for bonds will need to supply answers to basic underwriting questions. This usually takes up to five minutes to complete.
It’s good news that people don’t have to pay the full amount of a surety bond. The potentially bad news is that the result will depend on the business’s financial track record. Anyone applying for a surety bond will have to submit financial information relating to their credit history. If it is good, they’ll be paying less than 3% of the total amount. If it’s not, they will have to pay anything up to 15% of the total sum.

Business and Legal Considerations

Any business that has had issues with cover previously will also experience problems. Questions will be asked as to whether cover has ever been cancelled or denied. If a business’s licence has been denied, suspended or revoked this will also have to be disclosed.
Legal issues such as previous felony or fraud convictions can also have a negative effect when applying for the bonds.
Potential customers have less to fear if they have had no legal action taken against them, and if any child support payments are fully up to date. Other debts, judgements and lawsuits also come under the magnifying glass.
Additional things that will need revealing are if a business has previously filed for bankruptcy, and if so, when. If the owner of the company has previously failed in business this will also be taken into consideration.

Important research

It’s great to compare the rates of one company against another to get the best deal. Potential bond suppliers should also ask individual companies  for details of their range of rates, to make sure they get the best available.
Whilst many websites provide helpful reviews of different surety bond companies, it’s wise to get testimonials and references too.
As regards paying for the bond, some companies will want everything up front, while others will accept payment over six months. Another thing to consider would be the default options. Obviously no company takes out a bond with the specific goal of having payment problems! Having said that,  it’s important to compare the options available company by company.
Whilst there are many types of bond, the application process will be pretty standard. Once the best one has been selected and paid for, a digital document may be instantly produced online. It’s important to check with the company requiring the bond, however, as most will want the original in their possession.
The online process doesn’t take long, as we have said. The most important time will be spent beforehand, researching different companies. It’s important to go into it with your eyes open, knowing that business credit histories and statistics will affect the outcome. Personal financial information also comes into play. It’s worth seeking the best interest rate and whether you can pay for the bond in one sum, or whether the six monthly option will be needed. Research should also be made as to what happens if the company gets behind with these repayments. Once the bond has been secured, make sure the company requiring it has the document in the format they need.