People who work in a variety of industries—including immigration consultants, tax preparers, contractor services, and many others—need to get bonded. But not all bonds are created equal.
This guide covers the most important things you need to know about getting the right surety bond to meet your business needs and what that bond really means.
The specific process for getting a surety bond will vary based on the company you choose to work with. But, here are the basic steps to get bonded:
While you're doing your research, take note if there are different bond amounts for your bond type. And when you're ready to get a quote, keep in mind that your credit score or business financial records may be needed.
While there are many surety agencies that can help you, make sure you choose a state-approved and licensed business. You may also want to verify how many years the agency has been in business, and if they have a team of specialists dedicated to help you get the right surety bond—or renew your surety bond—as quickly and easily as possible.
Related Article: What is a Surety Bond?
No, not everyone is eligible for a surety bond. Being eligible for a surety bond typically depends upon two important things: whether claims have been made against your past bonds and your credit history.
A previous bond suspension could be a barrier for some people, depending upon how long ago the suspension took place, the reason for the bond suspension, and how long the suspension lasted.
Credit score changes or low credit scores aren’t necessarily a deal breaker for getting a surety bond. Many companies understand that credit scores can change over time, and sometimes life throws curve balls. You’ll want to find an agency that will work with your specific credit situation and bond history.
Additionally, the eligibility requirements for you, the bond principal, may be different if you need multiple bonds for all of the services you offer. The state you live in can also impact what type of bond you need, the cost, and which companies are allowed to provide policies in your state.
Being bonded means you or your business are backed by a surety company to protect your customers from financial loss.
In other words, if you fail to deliver goods or services as promised, your customer can file a claim against you or your business. If the claim is found to be true in court, the customer will be compensated by your surety company, and you'll pay the surety company back.
Let's take a look at some specific examples of what it means to “be bonded." A contractor is bonded to provide a customer financial recourse if a construction job is left unfinished or a roof collapses due to negligence by the contractor. A motor vehicle dealer bond protects the public against fraud by the auto dealer.
It’s important to remember that a surety bond protects your clients, while an insurance policy protects you, the business owner.
Now that you know how to get your surety bond, it’s time to decide on a bonding agency.
Let’s look at how to choose the right company for your bonding needs.