Home Finance The Basics of Surety Bonds

The Basics of Surety Bonds


The Different Kinds of Bonds

Within this universe that man inhabits, there are all kinds of bonds. They exists all across genres and understanding. For example, in chemistry there is the ionic bond and the covalent bond that both serve the purpose of keeping inorganic and organic life together in their separate and distinct ways. Similarly, there are such things within the realm of business and commerce known as Surety bonds. And, they keep businesses within industries sticking together within the exchange of funds through the public and privet sector. These bonds are a good way to make sure that everyone involved on certain projects in particular fields behave themselves on the level.

The Number of Surety Bonds

Surety bonds are present in every state within the United States. They are a way for government and businesses to gain momentum from each being institutions without getting in the way of each other or getting away with questionable practices. For this to happen effectively, there has to be a lot of Surety bonds available within the US. And, this number just so happens to top out around 50,000. That number is not the amount of these kinds of bonds. It is the total number of types of Surety bonds available. It is an impressive number. However, to be any use to the highest GDP (Gross Domestic Product) from any single country by far, it would have to be.

The Business of Surety Bonds

Since the subject of regulations is an aspect to Surety bonds, a natural question to ask is where do most of the funds from these bonds go and who gains the most from their availability. The front end of the answer to this particular question is that the monies fall into four major categories of business needs. These are license and permits, construction bonds, commercial bonds and court bonds. And, these categories themselves brake down into other kinds of bonds with lists that go on and on.

The Rules of Surety Bonds

Another aspect to Surety bonds that a business needs to know about when looking into the possible opportunities they can afford are their different types and the purposes attached to each. There are Bid, Payment, Performance and Ancillary bonds that are centered on different fiduciary needs when providing service to the public from a private business. Bid bonds make sure there is cash on the table when lenders enter agreements. Payment bonds make sure that people involved on the subcontracted level are paid for their work while contributing to certain projects. Performance bonds make sure that contracts and projects are completed within the letter of their construction. Ancillary bonds make sure that certain conditions surrounding a contract are met without necessarily effecting the details of the contract itself.

The Presence of Surety Bonds

And, it is most important to know when these kinds of bonds are absolutely needed to compete a project. If there is more than 150,000 USD (United States Dollars) on the line for the completion of a federal contract, then a Surety bond is definitely in play. The last thing to now about these types of bonds is that there is a small per cent fee for using them. It is actually less than 1 per cent.