Tag: Contractor Bond

How to Get a Contractor Bond in California

How to Get a Contractor Bond in California

Depending on whether you are new to construction or an experienced in the industry, we can’t deny the fact that getting a Contractor bond can be confusing. It is becoming impossible to operate the construction industry without a Contractor bond in California. To avoid a struggle when getting the bond, here are some steps to guide you.

Confirm The Bond Form You Need

When applying for the bond in California, you need to fill some forms. The form differs from one bond to another. For you to be served with ease, you need to know which form to fill. When you have the right form and bonding cash, the surety provider will serve you fast and accurately. To have the correct information, contact the relevant government agencies.  Here is a look at the different types of bonds in California.

Apply for a bond

After you have the right form and bonding money you can now search for a bond provider. After you find the right provider, he will ask for some basic questions regarding your professionalism and financial history. Depending on the bond provider, you may be asked to provide a social security number. If the company is registered under more than one owner, you will have to provide a financial statement for the other shareholders.

Get Bond Quote

After you have applied for a Contractor bond in California, you will get a quote. It worth knowing that the bond quote depends on some factors. One obvious factor is the bond amount, the higher the bond amount, the more the bond quote. Another factor considered is your credit score. If you have a good credit score, you may end up paying between 1 to 5 percent of the bond amount while is you have a bad history you can pay up to 20 percent. To get the bond quote, contact your bond provider.

Pay for the Bond

Once you approve the quote, you will need to pay the premiums. Most bonding companies require you to pay the whole premiums up front for you to bet the bond. If you are lucky, you can get underwriters who offer premium financing- only if you qualify. After the full premium payment, the company will process your bond and send it to you.

Bond information verification

Depending on how accurate you were when filling the forms, you need to verify the information in the bond is 100% accurate. Some things can lead to bond rejection which includes:

  • Wrong business address
  • Misspelled business name
  • Incorrect bond amount
  • Lack of correct signature present.

Take your time and verify the document information, in case you find an error contact your bonding company to help you fix the error.

File Bond with Obligee

The final step to getting a contractor bond is filling it with the obligee. But never file the bond if you are not sure of the information on the bond since it can be rejected.

Why a Contractor Bond is Good for Your Business

Why a Contractor Bond is Good for Your Business

The contract is awarded and the work is ready to be initiated. If the contract is not completed on time, there may have financial imparkations on the contractor by the Project Owner.  In any case, the contractor is on the high risk of financial loss if the project is not completed on time or delay due to any unforeseen circumstances. There are several things that can be done by a contractor to lessen the risk of financial loss.

For every construction project initiated, it is vital to have a construction bond for the project. Contractor Bond is a legal document created between the project owner and the contractor to initiate and complete the work as per the defined terms and conditions. It has many benefits for the contractor as well as the business:

  1. Assurance: When the contractor bond is applied during the construction, it gives an assurance to the project owner that the work will be completed as per the requirements and there would not be any delay for the delivery of the project. It can also be created to assure the timely payment for material, supplies, labour and subcontractors.
  2. Legality: Project owner always wants an assurance that the work is completed on time and as per the requirements, so all the important points are listed on the bond paper so that any party cannot divert from the main objective of the project.
  3. Surety: When a contractor bond is in place, it provides a surety to the project owner and the construction company that the work will be done as per the requirement and the payment will be done according to the points agreed to in the contract.
  4. Unbiased Decision: Whenever, the contractor bond is created, it involves three parties, obligee (Project owner), Contractor Company and the company that backs the contractor bond basically known as Surety Company. Whenever, Surety Company is involved it makes unbiased decision which will be in benefit of both the parties.
  5. Quality Assurance: When the contractor bond is signed, it provides guarantee to the project owner that the work will be completed with utmost quality and as per the requirements of the business.

Contractor bonds helps the companies to define the timeliness for the completion of the project and also provide a surety for payments been released as per the terms defined. Through a contractor bond, everyone gets benefited, for project owner the requirements are met as per the requirements and for the contract company the payment for the construction and other related payments are released easily.