The Expert Podcast

so why do you need a surety bond and why is it to your best interest to have this item even if it's required. a surety bond in most cases is sought after for performance on a construction project or contract. in the case of a bid bond the bidder may be required to post a bond to fulfill the obligations of the bid or the bid will be accepted without it. in the case of construction is a good example on the screen of a sample performance and payment bond it says the principles required under the terms of contract to furnish a a bond for the faithful performance of the contract. basically the bonding company is your business partner in this deal per se not in legal terms but you can look at them as somebody who helps you with this deal. first of all it give you financial backing so that your counterparty in the contract knows that you're backed up if something goes wrong with you if you get hit by a train if your equipment breaks the bonding company will make good on your contract so that the counter party doesn't have a loss. and you know don't consider this to be legal advice were not attorneys we're not giving you legal advice is just an overview of how bonds work. but the but the company will also in most cases help you prevent the loss. it's not like an insurance policy where they pay a claim for damages they also help you prevent those damages by underwriting the bond prior to it being issued to make sure that the contracts being entered into correctly and also that you're more likely to be able to fulfill the contract. because they don't want to pay the bond either so they're going to make sure that certain terms and conditions are met on your behalf and that you are in good standing. but it also helps you be able to bid on contracts and projects where your experience or financial condition might not be at the same level as the counterparty and the bond helps elevate you to their level. the other thing you will probably see is in some cases bonds are required for certain occupational licenses if you become a car dealership or private investigator or even sometimes health clubs are required to have a surety bond to make sure that their operation doesn't cause harm to their customers or the general public and if it does the bond will will make good on that because as a licensed entity in those fields you're allowed to do some things which have higher credentials and higher authority. if you're a car dealer you may be allowed to issue license plates or you're allowed to transact new car truck vehicle transactions. if you are a health club you're allowed to take money for long term contracts on relationships with your clients where they're paying in advance of it may not be getting their goods or services for later. so the bond helps you get the license from the state to give you more authority or more credentials to operate in a certain business environment but the state wants to make sure you're in good standing so the bond helps back you up. so look at that bonding company as somebody helps elevate you to the level of what is required either by the contract of the license and put you in a good business position.