Call Us 810-686-1470 ☰ ˟
Logo
Call Us 810-686-1470
  • Home
  • Get A Quote
    • Auto
    • Bonds
    • Business & CommercialImage of right arrow
      • Commercial Auto Insurance Quote
      • General Liability Quote Form
      • Business Owners (BOP) Quote Form
      • Builders Risk
      • Workers Compensation Quote
    • Farm
    • Flood
    • HomeownersImage of right arrow
      • Homeowners Insurance Quote
      • Manufactured Home Quote
      • Homeowner Flood Quote Form
      • Homeowners Insurance Quote Form
    • LifeImage of right arrow
      • Life Insurance Quote
      • Term Life Insurance Quote
    • MotorcycleImage of right arrow
      • Motorcycle Insurance Quote
    • Recreational Vehicle
    • Renters
    • Watercraft
  • Customer Service
    • AutomobileImage of right arrow
      • Request ID Card for Auto Policy
      • Request Declaration and Coverages Page for Auto Policy
      • Send Declaration and Coverages Information to Lien Holder
      • Add Vehicle to Existing Auto Policy
      • Remove Vehicle from Existing Auto Policy
      • Add Driver to Existing Auto Policy
      • Remove Driver from Existing Auto Policy
    • Business & CommericalImage of right arrow
      • Request Declaration and Coverages Page for Commercial Auto Policy
      • Add Vehicle to Existing Commercial Auto Policy
      • Remove Vehicle from Existing Commercial Auto Policy
      • Add Driver to Existing Commercial Auto Policy
      • Remove Driver from Existing Commercial Auto Policy
      • Request General Liability Certificate of Insurance
    • HomeownersImage of right arrow
      • Request Declaration and Coverages for Existing Homeowners Insurance Coverage
      • Request Evidence of Insurance
    • Life
    • MotorcycleImage of right arrow
      • Request ID Card for Motorcycle Policy
      • Request Declaration and Coverages Page for Motorcycle Policy
      • Add Motorcycle to Existing Policy
      • Remove Motorcycle from Existing Policy
      • Add Driver to Existing Motorcycle Policy
      • Remove Driver from Existing Motorcycle Policy
    • Recreational VehicleImage of right arrow
      • Request ID Card for Recreational Vehicle Policy
      • Request Declaration and Coverages Page for Recreational Vehicle Policy
      • Add Recreational Vehicle to Existing Policy
      • Remove Recreational Vehicle from Existing Policy
      • Add Driver to Existing Recreational Vehicle Policy
      • Remove Driver from Existing Recreational Vehicle Policy
    • Renters
    • Watercraft & BoatImage of right arrow
      • Request ID Card for Watercraft Policy
      • Request Declaration and Coverages Page for Watercraft Policy
      • Add Watercraft to Existing Policy
      • Remove Watercraft from Existing Policy
      • Change Primary Operator on Existing Watercraft Policy
  • Blog
  • Companies and Payments
  • Resources
    • Refer a Friend
    • Important Links
    • Calculators
    • Important Documents
    • Free Reports
    • Insurance Glossary
    • Frequently Asked Questions
    • News Center
  • About Us
    • About Eaton Insurance Services
    • Location Map
    • Employee Directory
    • Customer Testimonials
    • Privacy Policy
  • Contact
    • Contact Us
    • Join our Newsletter
Home > Blog > Should I Carry a Surety Bond as a Small Business Owner
FRIDAY, APRIL 11, 2025

Should I Carry a Surety Bond as a Small Business Owner

 

Surety bonds are essential for small business owners who work on a contract that requires a performance guarantee (e.g. the delivery of goods or services). Take some time to learn about these third-party promises to pay and how they may help you gain more business. woman facing on white counter

The Purpose of a Surety Bond

A surety bond provides protection between the first party who takes on an obligation (principal). They promise to make good on the contract to a second party (obligee) who needs the work done. A third party, the issuer of the surety bond, guarantees that the first party will perform the terms of the contract for the second party. Otherwise, compensation will result.

Common Types of Surety Bonds and Their Characteristics

There are different types of surety bonds available depending on the contractual situation. For example, a business involved in contracting work might use the following:

  • Bid Bond: Used to guarantee that the first party will enter the contract on behalf of the second party.
  • Performance Bond: Provides a guarantee that the first party will perform the terms of the contract as agreed.
  • Payment Bond: Provides a guarantee that the first party will pay for all associated work in connection with the contract. It will also pay for any subcontractors and for all materials and supplies required.
  • Ancillary Bond: All other bonds incidental to completing the contract such as a maintenance bond. This bond guarantees that the first party stands by their work. It shows that they will provide maintenance or corrections in a timely manner

Other types of situational surety bonds include commercial, fidelity, and court bonds.

All types of surety bonds have certain common characteristics:

  • Bonded amount: A cap on the first party’s equity interest (amount invested plus retained earnings).
  • Working capital requirement: This equals current assets minus current liabilities. It equals a percentage of the bonded amount.
  • Bonding capital: The maximum bonded amount available to the first party.
  • Bond premium: A fee paid by the first party for the surety bond.
  • Bond term: The term of years the bond assists your business.

How a Surety Bond Benefits Your Business

Companies performing any type of work, especially contract work, typically must carry bonds. This is particularly true for businesses bidding on government contracts. This guarantee provides the government (obligee) with the assurance that you have the financial capacity to perform the work on its behalf. This could lead to huge opportunities for your business.

There may be obstacles to obtaining a surety bond. Often, this occurs if your business lacks some of the financial capacity necessary to be underwritten for a bond. The Small Business Administration provides a surety bond guarantee program to assist you in obtaining a bond, however. This guarantee makes your business competitive and can lead to greater opportunities and financial success.

work on a contract that requires a performance guarantee (e.g. the delivery of goods or services). Take some time to learn about these third-party promises to pay and how they may help you gain more business.
Posted 4:27 PM

Tags: bonds
Share |


No Comments


Post a Comment
Required
Required (Not Displayed)
Required


All comments are moderated and stripped of HTML.

NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive
  • 2025
  • 2024
  • 2023
  • 2022
  • 2021
  • 2020
  • 2019
  • 2018
  • 2012
  • 2011

  • auto insurance(19)
  • michigan(18)
  • clio michigan(17)
  • home insurance(14)
  • genesee county(9)
  • genesee county michigan(9)
  • insurance agent(7)
  • renters insurance(6)
  • homeowners insurance(5)
  • corona virus(5)
  • boat insurance(5)
  • clio(4)
  • michigan insurance(4)
  • car insurance(4)
  • farm insurance(4)
  • insurance(4)
  • birch run michigan(4)
  • covid 19(3)
  • independent(3)
  • michigan auto insurance(3)
  • life insurance(3)
  • auto insurance reform(2)
  • house insurance(2)
  • frankenmuth michigan(2)
  • icy roads(2)
  • fenton(2)
  • rv insurance(2)
  • workers compensation(2)
  • bop(2)
  • texting(2)
  • christmas(2)
  • coverage(2)
  • safety(2)
  • quarantine(2)
  • grand blanc(2)
  • motorcycle insurance(2)
  • driving(2)
  • independent insurance agent(2)
  • business(2)
  • recreational vehicle insurance(1)
  • umbrella insurance(1)
  • snow covered roof(1)
  • commercial auto insurance(1)
  • claim prevention(1)
  • flint michigan(1)
  • personal umbrella(1)
  • holidays(1)
  • hartland(1)
  • prolife(1)
  • flu season(1)

View Mobile Version
Carrier
Carrier
Carrier
Carrier
 
Carrier
Carrier
Carrier
Carrier
Carrier
Carrier
Carrier
Home| Get A Quote| Customer Service| Blog| About Us| Contact
11436 N. Linden Rd. | Clio, MI 48420
Phone: 810-686-1470 | Fax: 810-686-8011
Email: info@eatoninsuranceservices.com
Social
Logo

Powered by Insurance Website Builder