Many businesses are required to obtain a surety bond as a prerequisite to the licensing process. If you are thinking of opening a business, then surety bonds can be one of the hidden costs you need to account for.
Obtaining a successful surety bond can seem daunting, but here are three tips that you can use to help take some of the stress out of the bonding process in the future.
1. Learn how surety bonds work.
In order to successfully acquire a surety bond in advance of opening your business, you will need to understand how surety bonds work. Many business owners make the mistake of thinking that surety bonds work like any other insurance policy, but these bonds actually represent a binding contract between you, the issuing company, and your customers.
You will sign a contract that stipulates your services will be completed according to certain specifications, and any deviation from these standards could be costly. Understanding that a surety bond differs from a traditional insurance policy will help you better evaluate the bonds available to you.
2. Find out your state's requirements.
Before you can successfully invest in a surety bond, you need to know what your state requires from these bonds in order to make you eligible to legally conduct business. Many states have different requirements based on the industry or service a business is providing, so double check your obligation before investing in a surety bond.
Failing to secure and maintain the correct bond could subject your new company to stiff penalties, so maintaining compliance is essential.
3. Find a surety bond with the right premiums.
Securing a surety bond can be costly. Your personal finances will play a role in determining your premiums, but these rates can vary from one company to the next. Be sure that you get quotes from several bond providers prior to making any decisions.
It can also be beneficial to partner with a company that will allow you to finance your bond premium so that you can pay the cost over time. This will help free up some cash for your new business.
Successfully obtaining a surety bond can be an important step for any new business owner. Be sure that you understand how surety bonds work, that you know what your state requires when it comes to surety bonds, and that you shop around to find a bonding company like NFP, P & C, Inc. that will offer you the right type of premium payment plan.
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