Everything you need to know
If you are a construction professional, you need to take the time to familiarize yourself with Canadian surety bonds. As a matter of fact, it would be really hard to be successful in the construction industry without these bonds. The reason for this is because just about all construction projects require contractors by law to obtain these bonds, before starting a project. Even if the law does not require them in your providence, most project owners will not hire you unless you obtain one of these bonds, because it gives them a sense of security.
Below, you will learn more information and tips about the different types of surety bonds available.
Construction Bonds And Contractor Bonds
A construction bond is basically an agreement that guarantees your customer or client that you will complete a job, as agreed upon in the contract. This type of surety bond will shield the customer in the event that you default on the contract.
A contractor bond is virtually the same thing and is oftentimes referred to as a contract bond. The only difference with this type of bond is that it can protect both sides. If one of the individuals mentioned in the contract does not meet their obligation, the others can file a claim with the surety company. These claims will oftentimes be an attempt to recover lost finances.
Another type of bond that you need to be familiar with is the bid bond. This type of bond will assure the project owner that the contractor will not raise the price of the bid or falter on the agreement. For instance, if the project owner decides to bid out a development project, they will often aware the bid to the lowest bidder. If the winning bidder decides to change the initial bid after being awarded the contract, this can definitely pose a problem for all involved. The bid bond will ensure the client that this will not happen, so everything goes smoothly.
How To Get A Surety Bond
Since most surety companies will issue bonds through an agency system, the first step to obtaining one will be to contact a professional broker or agent. This licensed professional will be able to guide you through the entire underwriting process, offer advice, and assist with managing surety capacity. Obtaining a surety bond will not be an easy process and it helps, if you are prepared.
Every surety company will have a different process in how they evaluate potential contractors. You will have to undergo a rigorous audit that is often referred to as the prequalification. This process will take quite a bit of time, because the underwriter will ask questions, look into your background, and collect information about you and your business. The surety company is going to make sure that you are able to meet your current and future obligations.
In order to better prepare, you need to know what the surety company will require of you. Below, you will learn about some of the things that a surety company may require from you.
- The company may need a chart of your current employees and their responsibilities
- They might need a detailed resume of your employees
- A balance sheet that shows your liquid assets, financial net worth, and liabilities