Establishing a surety bond credit line allows the Principal to transfer the risk of the subject projects completion where the surety (insurance company) assures the obligee (the project owner) that the principal (the contractor) is capable of performing the contract in accordance with the contract documents. Surety bonds provide the public or private project owner with a guarantee that the contractor is capable of completing the contract on time, within budget and according to specifications. A well-managed bond program can not only enhance a contractor’s credit options, but can be the difference between success and failure for your business.
A sampling of the types of bonds available:
- Subdivision Bonds
Guarantees that specified improvements such as streets, sidewalks, curbs, gutters, sewers and water mains will be installed in accordance with subdivision agreements.
- Maintenance Bonds
Guarantees that items including streets, sewer and water lines, curbs and gutters, and landscaping are maintained in accordance with agreements. Maintenance bonds are typically written for 10% of the original improvement costs.
- Escrow Bonds
Guarantees the return of escrowed funds allowing the contractor the flexibility to utilize deposits made by the buyer.
- Performance and Payment Bonds
Guarantees performance of the contract and determines the rights and obligations of the surety and the obligee. A performance bond protects the project owner from non-performance and financial exposure should the contractor default on the contract. It is directly tied to the underlying contract and imposes responsibilities on the surety to the owner and contractor for project completion. Performance bonds are typically written for 100% of the contract amount. Payment bonds protects certain subcontractors, laborers and material suppliers against nonpayment by the contractor.
- Miscellaneous Bonds
Miscellaneous bonds encompass a number of guarantee instruments including license and permit, notary, appeal, probate, mitigation and self-insured workers’ compensation bonds.
FIRSTGATE has decades of experience servicing contractors big and small. We deal only with the most trusted sureties, and have a proven record of bond placement. We can assist in the placement of a single specific project surety bond or establish a working surety credit line that allows periodic performance bond placements quickly throughout the year. The usual underwriting requirements call for at least two years of prepared financial statements along with a contractor questionnaire and a complete copy of the obligee’s performance bond requirements.