Performance Bonds – 5 Tips on "How To Get Approved" and Performance Bond Advantages and Basics


Contractors must be approved for a bonding facility in order to bid and complete most public or government works.

Types of contractual obligations:

1) Construction bonds Guarantee that a construction company will complete the project as promised.

2) Guarantees guarantee that the contractor will agree to complete the project at the bid price and will be able to meet the other required bonds, if the offer is accepted.

3) Performance obligations ensure that the contractor will execute the contract as agreed.

4) Payment obligations guarantee that subcontractors, workers and suppliers will be paid, as agreed.


Maintenance obligations, which guarantee against defects in materials or workmanship

The license or permit requirements, which are required to obtain a license or permit under state / provincial or local legislation.

The obligations of manpower and material, which guarantee the payment of the labor and to the suppliers of material.

Collage benefits for entrepreneurs

Performance requirements allow contractors to comply with the supply requirements for both government and private projects. The deposit is NOT an insurance, it is a financial guarantee. Bonding increases the number and size of jobs for which a contractor will have the opportunity to bid. Providing guarantees instead of other forms of security (letters of credit) also allows entrepreneurs to maintain their working capital.

How to start

STEP 1: Find out what bonds are required for the project you are offering by consulting the tender documents. Some jobs require a 100% guarantee, for example, while others require only 50%, for example.

2ND STEP: Contact a securities broker or agent. Your current insurance broker may have bonding capabilities, but a specialist is strongly recommended. Make sure the broker or agency you are dealing with is licensed in your state or province. It is also preferable that they know your type of industry. You will also want to make sure that the bonding company recommended by your broker or agent is approved by the federal government. For a list of accepted companies, see USA: and Canada:

STEP 3: Gather the information requested by the broker or bonding agent, who will then present it to one or more sureties of surety companies for approval. Your broker or agent may have individual requirements, but must include: financial statements prepared by an accountant / CPA, the curriculum vitae of key employees, a business plan, proof of a bank line of credit, and sufficient cash flow, completed project recommendations, and other relevant information for your industry.

The purpose is to convey to the bonding company that you have the capital, the capacity and the character to carry out the tasks entrusted to you. In other words, you keep your promises, respect your deadlines, have done or do similar work, and have or have access to the equipment and cash needed to finalize your future contracts.

STEP 4: Work with your broker or surety to provide additional information at the request of the underwriter of the surety company. Personal indemnities or guarantees, including declarations of personal net worth, are often requested and required.

STEP 5: Once you have received your first bond, keep your broker or agent informed of the progress of the work. Having a strong relationship with the broker / agent and the subscriber will facilitate the achievement of future obligations.

Bonus stage: Make sure that we discuss with your broker or bonding agent alternatives to traditional bonding guarantee systems if you are not eligible or if bonding requirements are minimal.


Congratulations! You are about to get approval for a construction bonding facility.

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