When running a small business, finding ways to get work can sometimes be a challenge. In some industries, however, there is plenty of work to do but many businesses are finding themselves unable to bid on jobs because of surety bond requirements. What is a surety bond and how can it impact your ability to bid on jobs as a contractor?
What is a Surety Bond?
A surety bond is a type of bond that is offered by an insurance company or a surety company that guarantees the quality of your work. If you are planning on bidding on a large government contract or a contract for a big construction project, you will most likely be required to have a surety bond before you can bid. The purpose of this type of contract is to protect the entity that is having the work done. For example, if you don’t do a good job on the construction, the surety company will step in and pay the government entity or the business a certain amount of money to compensate it for the wasted time and the bad job. While it is designed to protect big companies, it can hurt small businesses that are trying to find work.
Getting a Surety Bond
The process of getting a bond can be very difficult. When a small business applies for a surety bond, the surety company has to look at the record of the company before it can offer a surety bond. Before you can get a surety bond, you typically have to be able to prove that you have good credit and can qualify for bank loans. In today’s economy, that is easier said than done for many businesses. Because of these strict requirements, many businesses are not allowed to bid on big jobs even though they could easily handle the work.
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