Whether you’re the a new business owner or part of an existing operation ready to move to the next level, there are three things you need to let potential customers know you have what it takes to earn their business: being bonded, licensed and insured.
Certainly there are other factors that wise clients should consider when searching for a company to create a contract with, including the quality of past projects, attention to detail, costs and focus on customer service.
But knowing how to get bonded and going through the bonding process in order to receive those other credentials demonstrates that you’ve taken all the required steps to make sure your clients/customers are protected if anything ever goes wrong, your employees are protected if they hurt themselves on the job, and you agree to follow all local rules or regulations for whatever state or municipality you’re working in.
All three areas are important and collectively show that you take what you do seriously and that appropriate officials recognize this commitment. But knowing how to get bonded and the bonded process remain the most essential ingredients. Call us today! We are the nations leading Surety Bond agency. We partner with phenomenal bonding companies such as Chubb Surety, The Hartford, and many more. Too many to list. Let us shop your bond for you!
How The Bonding Process Works
Before we get too far, it’s important to define a bond: it essentially means that a bonding company has secured money for a business that could be available to consumers if they ever decide to file a claim against that business.
Bonding companies generally have high standards before they agree to approve a bond, and look closely at many details of the business requesting the bond, including its procedures, finances and leadership. By granting its approval, the bonding company declares that the requesting organization is seen as trustworthy enough that they can be insured for a certain amount of money, and also pledges that if something unfortunate happens involving the company, such as theft or legal problems, customers/clients will be properly compensated.
Companies able to receive bonds can use this status in all sorts of positive ways, including requesting insurance and promoting their business. Clients can also have more confidence working with a bonded company vs. one who hasn’t been through this process.
There are a variety of bonds for different circumstances, such as court bonds, which are often required by someone appointed to manage someone else’s estate; or contract bonds, which guarantee a contractor’s work on a specific job. Fidelity bonds protect companies from internal theft or damage.
But the most common is the surety bond, required before someone receives a professional/municipal license, and demonstrates that the bonding company acknowledges that the applicant is familiar with what’s expected for the license, and the public/customers will receive compensation.
The first step a company should take when wanting to learn how to get bonded is to find a bonding company willing to work with them. There are a variety of companies on the market and some specialize in certain types of bonds or clients, while others are happy to help anyone.
Some insurance companies are able to provide bond services, but they may not necessarily be as familiar with the intricacies of different bond types or the variety of available programs and rates for different conditions as a bonding company might be.
The bonding company will also discuss which type of bond will work best for a specific client. In most cases, the general surety bond is the best place to start. A fidelity bond also might be useful.
They also can discuss costs, which can vary depending on the type of industry and type of crime being protected against (theft, embezzlement, vandalism, etc.)
Plenty of paperwork
The company typically gets to know the applicant and asks them to gather certain such as credit reports; financial information and personal information from owners with at least 5 percent ownership in the company, and top managers, including Social Security numbers; and spousal information.
Bonding companies will also want information about the entity that’s requiring you to apply for a bond, called the obligee, often a state or municipality. The obligee information also needs to include the amount of money the bond must be for.
People seeking a bond for the first time for their company may need to rely on the strength of their personal credit, until the business becomes more established financially. Stronger credit and better financial data can lower the bonding company’s risk and make it more appealing to approve. Some types of bonds also may require stronger credit levels than others, such as court bonds.
Applicants with spotty past credit are still encouraged to search for a bonding company willing to work with them to find the right program. A bond may eventually end up being issued unless there are serious financial concerns – in some cases a higher-risk applicant may be asked to pay a higher premium than someone with stronger credit.
Once a bond is approved, applicants often move right to applying for insurance for it. A typical insurance program is between the insurer and the insured, but in a surety bond situation, the obligee also needs to be included. Bonds by themselves shouldn’t be considered insurance for a business, but should be thought of more as insurance for customers of that business.
Bonds shouldn’t be thought of as one-size-fits-all, since there are different options for different business types and conditions. But a knowledgeable bonding company can assist.
Call NFP Surety toll free at (800) 863-3210 today for free bonding quotes. We can write all types of Surety Bonds in every state. Our friendly and informative team of bonding experts are ready to help solidify your business.