How to Purchase a Surety Bonds: 5 Easy Steps

What is a Surety Bond? Surety Bonds Explained.

Surety bonds are terms that are usually used almost interchangeably through contracts. It is a promise to pay one party, either the obligee or beneficiary, a certain amount if the secondary party fails to meet the obligations stated in the contract that the parties have agreed upon.

Principal: They are the entities that are supposed to be performing the work, or fulfilling the obligations and conditions in the contract agreed upon.

Obligee: They are the beneficiaries that the work is being done for. They are usually the people or entities paying for the contract.

Surety: This is the company that guarantees on behalf of the principal to the obligee.

Are you interested in getting a surety bond? And are you wondering, how do you get a surety bond? And are surety bonds hard to get? Not really. Purchasing surety bonds is as easy as it could get. Here are 5 easy steps that you could follow to get your surety bond:

  1. Determine that bond type and bond amount you need.

There are four different kinds of bond types that you could choose from:

  • Contract Surety Bonds

Contract surety bonds are the ones that serve as an inducement for the obligee to enter into a contract with the principal. This type of bond is usually used in the construction industry. 

  • Bid bonds: guarantees that a contractor will enter the contract if the bid is accepted.
  • Performance bonds: guarantees that the contractor will fulfill the terms of the contract
  • Payment bonds: guarantees that the contractor will pay subcontractors.
  • Supply bonds: guarantees that the contractor will pay the suppliers of the materials being used.
  • Maintenance bonds: guarantees that the contractor will fulfill the requirements relating to repair.
  • Improvement bonds: required by municipalities for subdivision development.
  • Judicial Surety Bonds

These are also known as court bonds. They are used in a variety of situations that involve court proceedings. 

  • Appeal bonds: protects the party that won in the original proceedings for damages, usually resulting in the delays caused by an appeal.
  • Mechanic’s lien bonds: protects the defendant for damages
  • Attachment bonds: protects the defendant for damages from a property attachment.
  • Injunction bonds: protects the defendant from damages from an injunction.
  • Probate Court Surety Bonds

This surety bond guarantees that the trustee, guardian, or executor will properly perform their fiduciary duty to the beneficiaries.

  • Commercial Surety Bonds

A commercial surety bond is a general category for various bonds, it could sometimes get the judicial and probate court, as well as other bonds. 

  • License and permit bonds: often required by the government when a license or permit is to be issued. 
  • Public official bonds: This may be required of public officials.
  • Business service bonds: used to protect the clients and customers of a business from actions that were done by the employees of the business.
  1. Gather the information required to apply for your surety bond

You have to assess all the information you need and gather all the requirements you need for that surety bond to be successful. You first need to see whether your credit score is okay or not, having a low credit score might make it harder for you to qualify for a surety bond.

Aside from your credit score, you might need to prepare the following:

  • A Letter of credit
  • A personal promissory 
  • A cash collateral
  1. Apply with SuretyBonds.com
  2. Purchase and receive your bond.

Now that you have successfully purchased your bond, then you are now ready to receive it. Usually, it is issued to you 3 days after the payment.

  1. File your surety bond with the obligee

Are Surety Bonds a Good Idea?

Surety bonds are actually good for business. They instill trust in your company and can build up an even more reputable reputation.

There are a bunch of common mistakes to avoid when purchasing surety bonds, but SuretyBonds.com would be there to help you avoid the said mistakes. A lot of people seem intimidated by the whole process, thinking that they are better off without a surety bond because they don’t want to have to do all these extra steps, but obtaining a surety bond is for sure worth it, and easy. You just really need to identify what kind of bond is fit for your company and watch out for your credit score.