What Is A Surety Bond?

A surety bond is a legal agreement involving three parties; the principal (contractor), the employer (obligee), and the surety/guarantor. These bonds can provide financial protection for the employer in the event that the contractual obligations, as detailed in the bond wording and contract, are not fulfilled.

This article will tell you everything you need to know about surety bonds, including the most common types, getting a surety bond, and understanding surety bonds.

The most common types of surety bonds available include:

 

• Performance bonds
• Advanced payment bonds
• Retention bonds
• Defects liability bonds
• Restoration bonds
• Tender/bid bonds
• Deposit bonds
• Off-site material bonds
• Warranty bonds
• Section 106 agreements

One of the main benefits of surety bonds is that they act as a form of financial protection for the employer.

 

Other benefits include:

• Risk mitigation: In case of a default by the principal, the surety bond provides the employer with financial compensation to cover any losses incurred, providing greater protection of the underlying contract conditions. 
• Cash flow advantages: Surety bonds enable you to improve liquidity by freeing up vital working capital as a bond provides the necessary protection to the employer. This means surety bonds are a great alternative to significantly increased retention offerings.
• Enhanced credibility of the principal as it shows their commitment to completing the project as agreed upon. It also demonstrates the financial strength of a contractor.

The general process of applying for and getting a surety bond is very similar regardless of the type of surety bond you require. At CG Bonds, we have a quick, easy online application process, with our dedicated account managers providing an over-the-phone application assistance service.

The process for applying for a road or sewer bond is also very similar in many ways. You can find out more about road & sewer bonds on our dedicated website: RS Bonds.

Typically, to apply for a surety bond, our client account team will request and require the following information:

• Completed & Signed Application Form
• Most Recent Audited Financial Accounts
• Latest Management Accounts (if available)
• Copy of Bond Wording (if available)
• Additional Project Details and Specifications

Surety bond fees are dependant on the following factors:

 

1) Bond Value

2) Bond Type

3) Nature of Bond Wording

4) Bond Duration

5) Financial Information 

6) Applicant Trading History

7) Additional Security Available Against the Bond

8) Stage of Project

 

At CG Bonds, we have exclusive underwriting partnerships and we operate a best price guarantee policy, making our services accessible to clients with diverse financial profiles.

We recognise and understand there is a clear surety bond knowledge gap owing to their unique nature and intricacies. Here at CG Bonds, you will be allocated a dedicated client account manager who can hold your hold hand throughout the entire process and can liaise with your bond beneficiary, employer agent, and solicitor.

 

As well as the most common Surety bonds, here at CG Bonds, we can also source one-off Surety bonds, and we can also assist you with containing multiple bonds in one facility, which makes them quicker to acquire. Contact us today for more information about your Surety bond requirements.

The information provided in this blog is not intended to constitute legal advice or any other advice of a professional nature. The recipient of this information contained in this blog should always consult legal or professional advice.