In today’s unpredictable economic state, ever business owner wants to be sure about their contracts and deals. Though businesses can never be out of risks, however one can at least try to make it less risky by taking some necessary steps to protect it.
In this present condition, surety bonds are highly important for business owners who want to make it sure that the legal provisions of their closed agreements and contracts are properly followed and respected by all the parties who are involved in that particular contract or agreement.
However, the idea of surety bonds is nothing new in the sector of business; rather it is a very old tradition of keeping the businesses ensured at the times when long-distance trading was done between two countries. They use this bond to secure the trading terms between the parties involved in that agreement. The tradition has been followed till today. However, before you sign any of such contracts, you must know what that bond actually means.
What is a Surety Bond?
A surety bond is a contract, which is made between three parties; the contractor, the project owner, and the surety company. The bond provides guarantee that a construction venture will be finished without any failure with the requirements of the construction agreement. Through the bond the surety company provides an assurance to the project owner that if under any unavoidable circumstances the contractor fails to complete the project then they will take every necessary steps to make the project completed. They will ensure the fulfillment of the project up to the “face amount” of that surety bond. These types of bonds are required in publicly bid projects.
How Many Types of Bonds Are There?
In case of publicly bid projects, you can get 3 main types of surety bonds. These are: the bid bond, the performance bond and the payment bond. All of these 3 bonds are required in order to perform the project in a serious and lawful manner. Without any of these 3 bonds you cannot be able to bid on any of the public project as a contractor.
As a contractor of any construction project you need the security of these bonds. You cannot ask the project owner to give you a chance of bidding without these bonds on your hands.
These types of bonds are necessary for construction business because these types of businesses are very volatile in nature and the surety bonds help the project owner to get some other options if things go bad during the project. Besides, by coming with a surety bond, you are actually giving assurance to the business owner that a reputed surety company has examined and check the ground rules of your construction business thoroughly.
And once they get a satisfactory result out of their reviews they have decided your authenticity as a trustworthy and efficient construction company to bid the job.
The importance of surety bonds in any kind of construction job is huge. It is good for both the project owner and the contractor.