Advice on PERFORMANCE BONDS???

[dholladay]

I am in the process of trying to get a performance bond for my company. Apparantly they are extremely hard to get. Does anyone know just exactly what it takes to get it approved? Does the performance bond have to be in the company name? I know someone that has one but does not have commercial license,would that work if we partnered???

[DeltaT]

Your business insurance broker should easily help you with this.

[flange]

If your financial house is inorder, it should be a slam dunk to get one, although you may not get the amount that you want right away. It is kinda like a credit card in that you have to build your bonding capacity over time. Shouldnt cost a whole lot either.

[dholladay]

So basically it is based on assets?

[flange]

not really it is based upon past performance. Just as your limit goes up when you use credit cards, so does your bonding capacity as you use it over time. Als your rating should go down as well so it should cost you a bit less in a few years than it would now. You cannot get a five million dollar bond if you've only ever done four hundred thou in work, etc.

[TAC Service]

The amount of the performance or completion bond is based on assets. The bonding company needs something that can be converted to liquid if you fail to perform and they have to hire someone to finish the project. For most small contractors the equity you have in property such as your house is the most common. Your past performance and project experience will get you approved but the amount of the bond is based on company and personal assets. The cost of the bond is about 2% to 3% of the total contract price.

[dholladay]

So the best way to go is to find one that is fairly low and apply for that first. Because we are just now getting into the commercial stuff that requires bonds. We have been in business for 37 years, but have never done anything just really big.

[trane]

Several companies will bond you for less than $100,000 with less paper work required. Over that and you are looking at more paper work and financial information that is looked at very close.

[dholladay]

So what is the difference between a bid bond and a performance bond? We got a 10,000 dollar bid bond when we applied for our commercial contractor's license, and we got that with no problem. But then when we applied for a performance bond we were denied because one of the owners had a not so great something on their credit and they told me that it does not matter if one owner has perfect credit that if one person had something bad, they would deny it.

[trane]

You will find jobs that ask for a performance and payment bond. This means if you don't pay your bills the bond company will. These are harder to get because of the risk to the bonding company.

[dholladay]

Yea, just about every commercial job there is to bid on requires a performance bond!!

[TAC Service]

A bid bond is provided by your bonding company and is presented with the bid. It is providing the customer proof that your company is capable of bonding to the amount shown. If you have a relationship with a bonding company (annual retainer) they due not charge for bid bonds.