If you're positioning yourself to become one of the nearly half-a-million new businesses launched in the United States this month, there are some things that you need to be prepared for. For example, depending on what you're looking to do, you may need to have a surety bond secured before you can do business. Here's a look at what you should know about these bonds to help simplify the process and reduce confusion.
Surety Bond 101
A surety bond, if you're not familiar, is a contract agreement between three parties. It includes the entity needing the bond (your business), the person who requires the bond (your client), and the bond company that is backing your business and telling the client that you'll complete the job according to the contract.
The surety bond is essentially just a protection for whomever you're working with. It tells them that they can be sure they'll get what they're paying for. It also provides them with legal recourse if you fail to honor the contract. They can file a claim against you for their losses, and your bond company will help settle the balance. That's important, because it can give clients more confidence in working with you, which may help you grow your business quicker.
Is It Going To Be Expensive?
There's no single rate that you can rely on for a surety bond. Your premium will depend on how much the bond is as well as your credit history. Bond premiums are set to a percentage of the total bond amount. The better your credit, the lower the percentage that you'll pay. If your credit is poor, that can make it more challenging to get the bond. You'll often have to work with a surety bond program designed for bad credit clients. These are usually restricted to commercial bonds, so you'll have to talk with the surety company about what your options are based on your credit score.
You may also be required to pay a deposit or provide some collateral for your bond if you have bad credit. This is over and above the higher percentage rate you pay for your premium. Just make sure that you budget accordingly. The additional costs can be a small price to pay to secure the bond, especially when it's required for you to go into business.
What Should You Know About Renewals?
The surety bond is not an indefinite guarantee. You'll have to renew it periodically. The renewal period will vary based on the type of bond, the business you are in, and the state where you live. In many cases, they must be renewed every year, but you'll have to check the terms of your bond to know for sure. You may get up to two years or longer on your bond in some situations. It's your responsibility to know when yours expires and to ensure that you renew it before that expiration date. If you fail to renew your bond on time, you can be penalized for operating without the bond if you're in a business where it's required by law.
To ensure that you don't run into problems like this, start your renewal process early. The sooner you put the renewal application in, the better your chances of getting that certificate back before your existing bond expires. You may even be able to do your renewal online, which is even easier. Don't wait until the last minute to do it. Just check with your bond company to find out for sure, otherwise you risk confusion and problems down the road.
The more you understand about the surety bond process, the easier it will be to navigate. Talk with your local surety bond company today so you know what you will have to do to secure your bond. You can also visit websites like http://www.laprescali.com.Share