When you own a business, you have to ensure that you’re doing everything possible to make it succeed. Your business needs to be reliable and trustworthy to gain projects and ensure that it continues to prosper.
Many questions are associated with performance bonds. Whether you’re working in construction or own any service, you might already know what they are. For instance, what are construction bonds?
Read on, to find out the answer to this question, and four other frequently asked questions about construction bonds.
What Are Construction Bonds?
A construction or performance bond is a type of guarantee. A bonded contractor is obliged to perform the obligations under the contract to the project owner. In specific cases where the project is being done with a government entity or otherwise, a performance bond will also be required.
A performance bond involves three parties – you (the business), the surety company, and the project owner. Depending on the project’s scope, you will either be required to get a performance bond for 50% or 100% of the contract value. In some cases, less than 50% might also be acceptable.
Who Needs Them?
When you are looking into getting a performance bond, you should know whether you require them or not in the first place. Not every business or business owner requires such types of bonds, so you must ensure they’re required by you. Generally, the construction, service, and trucking industries require these contracts the most.
You might also require performance bonds if you are an individual working as:
- General contractor
- Electrical contractor
- Road Paving contractor
- Mechanical or plumbing contractor
- Janitorial contractor
What Should You Be Looking For?
When you are looking for a surety company that can provide you with performance bonds, you need to consider a few aspects:
- How long have they been in the industry?
- How reliable are they?
- What are their reviews online?
- Whether they’ve worked with any major construction companies in the past.
Ideally, the first time you contact a surety bond company, you should have experience that enables you to trust them. You don’t want to be getting into business with a bond company that you can’t fully trust, which can lead to miscommunication and other issues later.
Are There Different Types of Performance Bonds?
There are different types of performance bonds, and depending on your requirements, you might require a different one for each project. The common types of performance bonds are:
- CCDC Performance Bond: Standard surety bonds that are provided by the Canadian Construction Documents Committee guarantees the performance of the contractor by the contractor.
- Form 32 Performance Bond: New type of standard bond that is being used in Ontario by public entities for contracts worth over $500,000.
- SAC Headstart Subcontractor Performance Bond: It is ideal to use this for contractors giving contracts to subcontractors in various capacities.
How Can One Find A Performance Bond Expert?
Once you have found out what are construction bonds, you can get started on looking for the right expert for your surety bond. You can search online to find national surety bond experts in your area and get started there. You don’t have to worry too much about your performance bonds when working with the right expert.