What Is Bonding...

IlldeckU

Just started a construction company. I did mostly sub-contract work for the past 4 years and under the you know what! Now I'm going full time in July. I'm in PA and I have already got an insurance, 1 million, estimate now I want to learn more. What's bonded mean when you sau your insured and bonded?
Thanks!

ron schenker

A contractor gets "bonded" with a Bonding Agency. This basically is a guarantee to your customer that you will meet any and all obligations required of you on a service that you're providing. It's not cheap but it is a good selling feature for you as a contractor. I believe one of the qualifications is a clean criminal record and probably a good work history. If you're an upstanding, law abiding, hard working, honest person, you shouldn't have a problem getting bonded.

bmartin

In Ca. all contractors are bonded. You have to have $10,000 bond before you can get most licenses. This bond only costs a couple hundred a year. Some companies bond all their jobs (this costs somwhere around 2%-6% per job) but that is different than the people who advertise that they are licensed and bonded.

Luke's Dad

My wife works for a surety (construction bonding) agency... By being bonded the owner of the project is guaranteed that you are going to complete the job 100% and all suppliers and subs will be paid so their will be no liens on the project. If you fail to complete the project the bonding company steps in and finishes the job. You never want this to happen because the insurance company will recoup their cost. When you are approved for bonding you will be required to sign both personally and corporately to get the insurance.

When a new contractor is starting out the bonding company looks at your companies financial worth, personal worth and your ability to sucessfully complete the job you are bidding. They then charge you a premium of $15-$30 per thousand of the contract price. Many times they also take collateral until you have a proven track record of being able to complete jobs in your project range. In Pa and NJ this is a per job cost not a blanket bond like in CA.

Hope this helps

IlldeckU

Thanks guys! I was unclear as to how it works! That helped a ton!
E

jwbond

You all have very good answers, as a bond agent, I am impressed! However, some of you are begining to refer to specific bond types (e.g. performance bonds). The question asked, what is bonding...Here is the most generic answer I can give.

It is a three party agreement between yourself (the principal), the obligee (whoever is requiring the bond), and the carrier (the bonding company). The bond is a written guarantee from the carrier to the obligee that the principal will perform as listed in whatever the bond is guaranteeing (could be a license or a specific contract). The principal pays the carrier a percentage of the bond amount as a fee for the guarantee. If the principal defaults, the carrier pays the obligee up to the bond amount to cover any losses. The carrier in turn looks to the principal for repayment (keep in mind, bonds are NOT insurance).

Let me know if you have any questions, I am always happy to help!

FramingFanatic

Bonding? Aint that where the woman takes yah and ties yuh up anmmd does stuff to yuh?

CaliDesigns

I thought it is what you pay to get out of jail.

Chris Johnson

California bonding is not a bond like you are talking about.

You are looking for a Performance Bond, it's another way to say Insurance...it is expensive, you need a clean everything record and an excellent credit rating. It is based usually on 50% of the value of the project, you will need assets or the ability to repay it if you fail, if it's your first one Good Luck, I did commercial and needed to get one, Family had to co-sign for me in the beginning. I haven't used one in years, so things may have changed slightly.

You charge the cost of the bond to the client above and beyond your contract amount. Good chance they are using excessive funds from a bank who is requesting this from them. It's the only time I needed one.

__________________
Chris

RizzoMaryland

Bonding is a verb used to describe someone acting in an undercover and covert manner. It is derived from a popular movie with a similar title. See also stealth

__________________
"An idea is salvation by imagination"
Frank LLoyd Wright

jwbond

Sorry, but there is no such thing as "California bonding", unless you are referring to surety bonding within California, which is no different than surety bonding in the othr 49 states.

Insurance and bonding are two completely different products, don't confuse the two! I have a great article on the differences between the two, but I can not post it (forum rules) since it resides on my agency's site.

I don't think you can clearly say that he is looking for a performance bond either, as a performance bond guarantees a contract. It doesn't sound like he has a contract yet, so when he refers to "insured and bonded" it is more likely a license bond.

I suppose it is all relative. Bonds typically range from 1-3%.

Correct. However, good credit is not required for all bond types anymore.

Nope. They base it off of 100% of the contract price every time, as that is the amount of potential liabilty.

They will check to ensure you have the ability to repay on a default whether it is your first or 1000th bond! That's how bonds work, they are credit, not insurance. If you default, you are ultimately responsible for repayment.

Co-signers are not needed for many bond programs, but each situation is unique.

The bond should always be included in the contract price.




Let me know if you have any questions!

neolitic

I have a question.
Why don't you just buy an ad
from Nathan, and quit digging up
2 year old posts, as though you
were helping out the OP?

__________________
Put your location in your profile!
(Sorry....it seems there really are dumb questions)

jwbond

Actually I contacted Nathan yesterday about ads, he sent me the information today.


I did a search for all of the posts I can find on bonding within this community, as most of the information provided is inaccurate. The original posters might not benefit, but I would think Nathan would want it to be corrected for anyone reading older posts. Large portions of a forums traffic is from people doing Google searches that turn up old posts. You may be ignorant to the fact of a site's traffic, but I am sure Nathan knows this very well and would preferred for it to be corrected.

tnt specialty

bmartin summed it up best.....

Home Pro

What is bonding...

Bonding is when you go out with the guys for a few beers...

__________________
The Home Pro's

laybrick

stop cutting the ends off of your ham

Double-A

I appreciate the digging up of old posts, especially when they contain bogus information.

The times I dislike it are when the digger is just "me tooing" something.

We can only benefit from being corrected. As for buying advertising, yes please, but only if you will come around and answer questions about your products, i.e., participate.

(That's my personal opinion and is in no way meant to reflect this site's policies or opinions on the matter.)

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

mdshunk

That's how you win friends and influence people. Suggest that they're ignorant. Way to go. I wouldn't buy a nickel's worth of anything from a guy that acts like that. Nathan's not really the guy you need to "suck up" to, since he's generally a very hand's off forum operator. It's the guys that participate here on a regular basis that you need to appeal to. I'm sorry to see that you burned your bridge here already.

jwbond

Your right, ignorant was the wrong choice of words. I apologize to that poster.

However, I do believe that neolitic's comment was uncalled for. The forums have a lot of misinformation that I have been trying to correct.

I am not really looking to stir up business on an online forum. Surety bonding is built on personal relationships, not online. In fact, my bonding companies only allow me to operate in specific territories, so online business would be pretty much useless.


I was excited to find a community that could use some guidance on suretyship and thought I would help out in my free time. I can't say I am getting the warm and fuzzies here though, so maybe I'll spend my time doing something more constructive. No sense in helping people that would prefer to be left in the dark I suppose.


If any one has any questions regarding bonding you can feel free to private message me or start a new thread (and private message me to let me know about it) and I will be happy to give free advice to those who need it.

Norrrrrrrrrrrrm

I think some of your info was helpful. Thanks.

__________________
Norman Sharp
http://www.sharpimprovements.com