Performance Bond
A performance bond guarantees that a project will be completed as specified in the contract documents.
How to Get a Performance Bond
- Get pre-approved in minutes with a simple application.
- Submit the RFP documents for the project. Bid bonds available same day for projects up to $1M!
- Pay your bond premium and receive your executed bond documents.
How much does a performance bond cost?
Performance bonds can vary in price depending bond program your company is approved for and certain aspects found in the contract documents. Rates on these bonds can be anywhere from 1% to 3%. If a bid bond is required during the bid process, there is no charge for the bid bond.
Who does a performance bond protect?
A performance bond is required for most public works projects to protect taxpayer funds and is issued on a contract-by-contract basis. The bond protects the obligee (typically the city, county, state agency, etc.).
This bond also guarantees financial compensation for the project owner. If a contractor fails to complete their job, the project owner can appeal to receive compensation by filing a claim against the bond. If the claim is awarded, the surety will compensate the project owner for the contractor’s failure to perform. However, it is important to note that the contractor is liable to pay back the full claim amount, plus additional expenses, to the surety.
Credit Only Bonding Program
Credit only performance bonds are designed for small and growing contractors handling contracts under $1,000,000 in size and are ideal for those with a strong credit history. Unlike traditional performance bonds, credit only performance bonds for contractors require solely a simple credit check to get bonded—eliminating the need for financial statements, tax returns, and detailed underwriting.
Once credit is approved, and no exclusions apply in the contract, NNA Surety can issue performance and payment bonds in minutes. Since less information is reviewed in a credit only bond program, the rate on these bonds is a flat 3% of the final bond amount.
Standard Contract Bond Program
Standard performance bond programs are ideal for contractors performing larger contracts or needing aggregate bondability over $1,000,000. A full financial review is required for this program, and rates vary based on the contractor's financial strength and needs.
Required underwriting material for Standard Program:
- Contractor questionnaire
- 3 years of business financials
- Personal financial statement on owners
- Work-in-progress schedule
- Accounts receivable and accounts payable schedule
Traditional vs. Credit Only Performance Bonds
| Feature | Traditional Performance Bond | Credit Only Performance Bond |
|---|---|---|
| Approval Time | 3-5 business days | Within minutes |
| Paperwork Required | Contractor questionnaire, financial statements, work-in-progress schedule, etc. | Minimal information needed: application and credit check |
| Application Process | Thorough | Convenient and quick processing |
| Ideal for | Individual contracts exceeding $1,000,000, Aggregate bonding capacity need of over $1,000,000, Complex contracts | Smaller projects, fast turnarounds, quick approvals |
Payment Bonds
A payment bond, also known as a labor and material payment bond, is necessary for state or federal construction projects. It guarantees financial compensation to protect subcontractors, vendors, and suppliers involved in a project.
If a contractor fails to pay the parties involved, a claim can be made against their bond. If a claim is upheld, the surety issuing the bond will cover the claim amount. However, the contractor may be responsible for paying the claim amount back to the surety.
Payment and performance bonds are closely related, as they are usually both required to protect the work of a project.