How Much Should You Expect To Pay For Construction Surety Bonds?
If you happen to work as a construction contractor in the country of Canada, there will most certainly come a time when you’re forced to delve into surety bonds and learn why you need surety bonding. Those that are new to the industry may not be entirely familiar with surety and this can make it difficult for them to know precisely how to move forward. And even those that are veterans will agree that surety bonds remain a somewhat complex subject. This is definitely the case when it comes to the costs of surety bonds. All contractors will want to know precisely how much they’ll be required to pay, but figuring out the total is surprisingly easier said than done.
You’ll find out why this is the case below.
Nothing Is Set In Stone
First and foremost, you should realize that nothing in set in stone, when it comes to the rates associated with surety bonds. Each and every time you invest in a surety bond, you should expect to pay a different amount. The price will most certainly differ based on the situation, the surety company, your project, and your company. While you may be bidding on the same project as a friend, it is highly likely that your friend will pay a different amount for their bid bond than you will.
The only definite way to determine your precise cost is by obtaining a quote from your surety company of choice.
No Need To Pay The Entire Cost
When bidding on a new project, you will need to invest in a surety bond. You will be required to obtain a bid bond for a specific amount. This amount will depend on the value of the project and the total of your bid. At first, you will find that the total amount needed will be immense. The good news is that you will not need to pay the entire amount. Instead, you will work with a surety company and they’ll allow you to pay a certain percentage of the total, while they’ll cover the rest.
The percentage you will be required to pay will depend on several different factors.
First and foremost, you should realize that all surety companies will examine your personal credit score and history to determine your fees. Having a bad credit score may even make it very difficult for you to obtain the bonds that you need to bid on an upcoming construction project. While you may be able to find surety companies that work with those with bad credit, you should expect to pay a little bit more. This is the case, because those with bad credit are often considered a higher risk than those with good credit.
Your company history and the amount of experience your company has will also be vital. A longer running company with a good reputation will be deemed a lower risk than a company with very little experience. And, a company with a poor reputation will find themselves in an even worse situation. This is why it is absolutely essential to maintain an unblemished reputation. Satisfy your clients and strive to get the job done within the allotted time period.
This combination will keep your surety rates low, while ensuring your company has a bright future.
Also, you should realize that your company’s finances will make a world of difference. The surety company will want to know for certain that you’ll be able to repay their loss should they be required to make a surety claim payout. If you maintain low debt and keep a decent amount of cash on hand, you will be able to keep your rates to a minimum.