If your construction company has recently started delving into commercial construction projects, then you have to become familiar with surety bonds. Surety bonds are often a requirement for commercial construction projects because bonds reduce risks. Keep reading to learn more about how surety bonds can protect your construction company and grow your business in the process.
What Are Surety Bonds?
Essentially, surety bonds are contracts between your construction business, an insurance company, and your client. When you purchase a surety bond, the insurance company is essentially giving their word that they will back you financially. The company that benefits from the bond is your client, the company that is requesting the construction. There are, however, different bonds can work in a variety of ways.
Types of Surety Bonds
Not all surety bonds work in the same way. In fact, your responsibilities relative to the construction contract will determine the type of bond you need for your construction project. In some instances, you will be required to purchase multiple bonds for one construction project.
Bid bonds are established early, and give the contracting company the reassurance that your company will carry out the terms of the contract established during the bid process. These bonds help protect the contracting company because they are likely acting on another company’s behalf. However, even if they are acting on their behalf, bid bonds protect them from an inability to commit to the contract.
When you purchase a performance bond, it is saying that you are committing to performing the work outlined in the contract. These contracts are important because if you fail to do the work you agreed to do, then you jeopardize the contracting company’s ability to complete the project.
A payment bond assures your contracting company that you can pay the vendors or suppliers you hired to perform the work. This bond protects the contracting company from being sued by vendors or suppliers you hired.
As an experienced second-generation construction company, we know a lot about bonds. We can help our clients save money as their general contractor or construction management company. Since bonds are based on experience and expertise, we can purchase bonds at a reduced rate. In addition to saving money, when you hire our company to manage your construction projects, you get the benefit of our construction expertise, which can shorten your project’s schedule.
Our experience in the industry has long been a secret weapon for our clients when it comes to taking advantage of our ability to save money for them. When your construction needs require an expert in the industry, give us a call.