Many businesses and municipalities require surety bonds for the type of work that they do. Qualifying for surety bonds will depend in part on your past (and current) ability to manage the financial side of a project. A lot also rests on the ability of your staff to perform properly. If you’re in the market for a surety bond, it’s important to hire and train staff to be competent in their duties. Having good project managers that can provide ongoing reports and see a project through really helps build confidence.
During the bonding process, you need to make sure that you put specific people in charge of the financial and organizational management of specific projects, for example, staff members with a solid work history in the area of preparing an organizational chart. Knowing that you have the right people being held responsible for what’s on your organizational chart will make you feel much more competent in dealing with the task of acquiring surety bonding.
How surety bonds differ from insurance
While it may seem like a form of insurance, a surety bond is a little different from an insurance policy. While an insurance policy considers the likelihood of a specific event occurring for which you pay the required premiums, a bond assumes that the company is going to succeed in its endeavors, and the bond company only seeks to recover its losses in the event that a project fails. A bond is an assurance, a statement that your customers can trust you to complete a project or a transaction and do it to the best of your ability.
The surety company wants know that you have strong financial statements, along with a line of credit available to the organization. They will likely want to know about the personal credit histories of those involved with the project as well. You should be prepared to go deep into your financial outline and be able to show strong proof of financial competence.
Your past is very important when you’re looking for surety bonds, so as you complete projects, make sure that you document them and ask for references. That way, a surety bond company will have a good sense of your ability to successfully complete any project that you take on.