Surety Bond turn around times
A surety bond is a written agreement that usually involves a contractor and their clients. However, there are three parties that are usually involved with the bond process. Of course, you have the contractor (principal), client (obligee) and the third party, which is the surety company. This is the company that will underwrite the bond and make sure that the contractor is in compliant with the terms of the contract.
A surety bond basically guarantees the client that if any damage occurs on the job site, they are going to be fully covered. Even if you, as the contractor cannot afford to pay the damages, the surety company will take care of the cost, but this does not mean that you will get off scot-free. Most provinces and territories require contractors to be covered under a surety bond, before any work takes place. This is why it is important that you understand everything you possibly can about these bonds, before applying for one.
Making Sure You Need A Bond
As mentioned above, most government entities require this type of bond, before a construction project can proceed forward. However, there are some instances that a surety bond will not be required. Before you begin work on a construction project in Canada, it will be imperative that you check with the appropriate government entity. It may turn out that in fact you do not even need a surety bond, but you still may want to get bonded. Since, some project owners will not even consider hiring a contractor that is not bonded.
You Must Qualify For A Bond
Since a surety company will be on the hook for any damages or liabilities that take place on a job site, you are going to be vetted. A surety company will do an in-depth background check on you and your company.
The first and foremost important thing that a surety company is going to look at is your financial stability. When applying for a bond, if you want to speed up the entire process, be sure your CPA has all your financial statements prepared and ready to go. If your finances are in good shape, a surety company will consider you a responsible applicant. This will not only speed up the entire process, but it will save you quite a bit of money on the annual premium.
Integrity is another big factor that surety companies consider. They are going to contact your business associates, suppliers, and former clients to see what they have to say about your company.
The last thing that a surety company is going to check out is the longevity of your company. The longer that you have been in business, the easier it will be to for the underwriter to make an informed decision. In fact, if you are a new company, you may find it much more difficult to get approved for a surety bond. While, this may seem unfair to a new contractor, it is imperative for surety companies to find sufficient evidence that all applicants are capable of fulfilling the terms of the contract.
Finding A Surety Company
There is an unlimited array of companies in Canada that provide underwriting services. It will be imperative that you vet these surety companies, in the same way that they vet you. Also make sure that you compare the premiums for the surety bond. Even if the price differential is minimal, it can sometimes make a huge difference is choosing the correct surety company. Travelers Canada Can be a good start if you are looking for an insurance company.
Applying For A Bond
You will be happy to know that most surety bond companies will offer free quotes. However, there are some surety companies that require a small fee in order to get a quote. If you find a quote that is suitable to your need, you can apply for the bond by utilizing that company’s application.
You are going to be required to enter all sorts of information about yourself and your company, so be prepared in advanced for this. It is important that you know you will also need to sign a credit release agreement.
Know what type of bond you require, before moving forward. There are 3 common types of surety bonds that you will need to familiarize yourself with. First, is the bid bond, which ensures that the project owners that the contractor will enter the contract, if he or she is granted the winning bid.
Next, you have the performance bond. This bond guarantees that the work will be completed as agreed upon in the contract. Last, you have the payment bond, which ensures that the contractor will make payments to the subcontractors and suppliers. A lot of big construction projects will require that a contractor be bonded with all three of these bonds. However, this may not be necessary for some of the smaller construction or renovation projects.
Turnaround Times For Bonds
The amount of time that it takes to become bonded will really depend on you and the surety company. Every surety company has different procedures in which they will undergo, before they approve an application. For instance, some companies may do a financial and integrity check. However, another underwriter may just perform a financial check.
If you want to speed up the entire process, you can make sure that you have all your paperwork prepared in advance. Have your CPA and bank prepare all of your financial statements beforehand. You can even have a list of your business associates prepared with contact information.
Thanks to the technological advancements with the Internet, most surety companies are now offering bond applications and approvals online. It has been reported that this method is much faster and simpler. So, if time is something that you are concerned with, you may want to look into this online electronic process which can tell you the exact surety bond turn around times.
Do Surety Bonds Expire
Just like everything else in the world, a surety bond will expire after a certain amount time. The expiration date is something that will be agreed upon, when the bond is first issued. However, in most cases a bond will usually last for a year from the initial date of approval. It will be up to you, as a contractor to make sure that you keep up with this information.
In order to prevent your bond from expiring, all you have to do is send in your premium payment several weeks, before the expiration date.