How To Get A Construction Bond
Contractors and companies in the construction business will know how important getting a construction bond is. Without securing one, it is almost impossible to win a bidding. The process to acquire a bond is not that complicated, as it only takes a few steps. When the contractor is able to submit this important requirement, they can proceed to join the bidding and if they have the lowest bid, they might win the contract.
Developers rely on these construction bonds to protect them from bogus or unreliable contractors. In the past, contractors would use various tricks to win the contract, like putting in extremely low bids and then raising the price after being awarded the contract. Worse, some of them just abandon or drop out, leaving the developer hanging. The construction bond is there to avoid these situations, as well as protecting the subcontractors in case the contractors do not pay them.
Steps To Get A Construction Bond
Know What Type Of Bond Form You Need
Different states will have their own form for applying for a surety bond. This is especially important if you are bidding for a public or government contract, which is why you should verify this with either the developer or the project owner. Another important information is to ask for the bond amount, which can be calculated based on the project’s estimated cost and the percentage required by the developer.
Search For Bond Providers
The next step is to look for someone to secure your surety bond. There are different companies that provide construction bonds, normally connected with a bond producer. The producer makes it easier for the contractor to find the best bond companies, so refer to the National Association of Security Bond Producers to find the one closest one to you. Nationwide bond providers are also a great idea for contractors who do work in various states.
Get A Bond Quote
Even if you need a specific bond amount, it might cost differently depending on the bond company issuing it. The best way to find out and compare is to ask them for a quote. You will need to provide the bond amount provided by the developer, and the bond provider can compute the premium. This amount, the cost of the surety bond, is also based on the contractor’s credit score. If you have a good credit standing, you will be asked to pay about 1 to 5% of the bond amount, but those with poor credit might have to pay up to 20%. The best way to be sure how much it will cost is to ask the provider to give a quote.
Pay For The Bond
Once you receive some quotes, you will be able to choose from between them. The next step is then to pay for it, usually in full. Once it has been paid, the bond provider will secure you and send the documents required for the bidding process.
Check The Information
You will need to double-check the information stated on the surety bond awarded to you before submitting it to the developer. Small things like a wrongly spelled business name or wrong business address, as well as the incorrect bond amount or missing signatures can lead to the bond and the bid getting rejected by the developer. So before you send them, make sure to check the form and contact them for any inconsistencies or errors.
File The Bond
Once everything is checked and verified, it is now time to send it to the developer and prepare for the bidding process. You can then prepare for and participate in the bidding process, with all documents like the construction bond paperwork on hand.
Construction bonds are a vital part of the process of finishing a project because it provides a safety net for the developers who have their own deadlines to turn over the building. Even though it implies a bit more paperwork for the contractors, the smooth accomplishment of work is for the best interest of all parties involved.