How To Get Your Company Bonded- Feel Free To Ask Questions - Farmer Brown Insurance Agency - Contractor Talk

How To Get Your Company Bonded- Feel Free To Ask Questions

 
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Old 10-05-2016, 03:48 PM   #1
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How To Get Your Company Bonded- Feel Free To Ask Questions


BONDAGE (no not that type.)

Everyone has probably heard horror stories from other contractors about the hassle and aggravation of trying to obtain a bond. Well let me tell you I know a guy. He is called Tom “The Bond Guy”.

This is what he tells me about bonds. First in a low voice barely audible he says” There are three types of bonds that contractors may need. They are License/Permit Bonds, Bid Bonds and Payment and Performance bonds.”

He goes on to explain to me that for most License/Permit bonds he can get those real easy. It usually only takes a couple of minutes and he can email the bond. This saves the client time and money as in a lot of cases the contractor does not realize he needs a bond until they go to pull a permit. With no bond you generally can't start working and you know if you are not working you are not making any money. These generally cost around a $100.00 each. Also you will need a new bond for each City or Town.

Now if you have a job and you want to bid on it many times a bid bond will be required. These can generally be obtained the next business day after I have a completed application. Bid bonds are generally in amount of 10% of the total contract price of the bid. If the contract price is less than $350,000.00 these bonds can be obtained with just the signatures of the owners and their spouse. The only caveat is that they have to have credit scores of above 700, no bankruptcies and have been in business for at least a year. The other great thing about Tom The Bond Guy is that he does not charge for bid bonds.

If you are the low bidder you will then be required to provide the Owner a Payment and Performance bond. These are actually two separate bonds but are in most instances they are issued together. The total cost of these bonds is a combined 3% of the contract price. So for example if you were the low bidder at $150,000.00 the cost of the bond would be $4,500.00. This cost should be included in your bid. Just like insurance this money is NOT returned at the completion of the project.

If you have projects above $500,000 the process is a little more time consuming but in reality it is not that hard. You will just need copies of a balance and profit and loss statement for the previous two years, quick books is fine. In addition you will need to complete a 3 page questionnaire that you list your biggest jobs and your current work in progress. If you are looking for bonds in excess of $1,000,000 you will have to provide CPA prepared financial statements that cost anywhere from $3,000 to $6,0000 to prepare.

Tom The Bond Guy has also written a E-Book that is free to download by Clicking Here. This E-Book goes into much greater detail. He would also be happy to answer any of your questions. You can contact him directly a 312-878-2372 or email [email protected]

I hoped you found useful my information from Tom the Bond Guy. As usual I am available to answer any questions you may have concerning Contractor's Insurance. Thanks for your time.

John M. Brown 773-777-2100 or [email protected]
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