There’s always going to be a need for construction work. As long as the population continues to grow, there will be a need for more homes, businesses, and buildings to serve everyone. That’s on top of existing structures needing remodels or replacements. Running a construction business involves finding potential projects, bidding on them, and then lining up the contractors and supplies to get the work done. However, you also need surety bonds. If you’re not sure why this is the case, then it helps to know how surety bonds protect your business.
Protect Your Business With Surety Bonds
Surety bonds protect your construction business in many ways. Knowing what they are will help you make sure you get the right ones you need to operate properly.
- Surety Bonds Are A Requirement: Many different surety bonds are mandatory for federal-level contracts above a certain level. Many state- and local-level governments follow suit in manding them. They’re such an industry expectation that many private clients are also likely to mandate them, too.
- Customers Look For Them: Even when a surety bond isn’t technically required, they install a great deal of trust and faith in prospective clients. Adding them to your bids will give them peace of mind that they might not get from many other proposals, and that can mean yours is the winner out of the pile they have to sift through.
- Contractors Want To See Them: Payment bonds in particular make sure that any contractors you pull in for specific parts of a project will be sure they get paid, no matter what. Even if your business handles a larger project, you’re likely going to need many different role players and specialists to perform certain tasks.
- Suppliers Like Them Too: Suppliers of materials, tools, equipment, and goods are crucial to your project happening on time or even at all, but they also need to get paid, just like your contractors. They’re more comfortable doing business with someone who is more likely to pay them.
- They Protect Your Bottom Line: The biggest thing that surety bonds do is protect your company’s finances from mishaps, cost overruns, and the many other things that might cost you a lot of money. They work a lot like insurance in protecting you from expensive matters.
While the construction sector is often associated with surety bonds, there are times that these might actually apply to other sectors as well. Surety bonds are common requirements for contract work with any level of government, and many private organizations or establishments might also ask for them, too.
Different Projects Have Different Requirements
Certain bonds might be necessary for particular projects like the Fed MSC 82. This one is a common requirement of many federal contracts, but it’s also commonly used at the state and local government levels, too. For that matter, many private organizations also like to see it included since it makes them feel better about a particular contractor or construction business that features this bond. It’s always a good idea to see how much it costs to get this bond and possibly include it with your bids.
A Level Playing Field
The costs of surety bonds often depend on the size of the coverage being provided, but the premiums will also be contingent upon different factors. These can range from the credit score of the business owner to how much annual business they do. That sometimes could mean squeezing out smaller players while larger construction firms get to play ball, but that’s not always the case.
The Small Business Administration has a surety bond program that offers guarantees for certain surety bond agents so they can cover small or independent contractors and construction businesses.
Multiple Layers of Protection
As you can see, surety bonds protect your business in many different ways. They keep you compliant with government rules and industry regulations, they convince clients you are trustworthy and reputable, and they make sure that people and suppliers are paid as need be. They also often prevent liability issues that can eat up your profits.
