{"id":362,"date":"2010-10-03T17:55:34","date_gmt":"2010-10-04T00:55:34","guid":{"rendered":"http:\/\/www.constructonomics.com\/blog\/?p=362"},"modified":"2019-03-22T10:06:07","modified_gmt":"2019-03-22T17:06:07","slug":"what-you-need-to-know-to-get-a-surety-bond-as-a-new-contractor","status":"publish","type":"post","link":"https:\/\/constructonomics.com\/blog\/2010\/10\/03\/what-you-need-to-know-to-get-a-surety-bond-as-a-new-contractor\/","title":{"rendered":"What You Need to Know To Get a Surety Bond as a New Contractor"},"content":{"rendered":"

New contractors have a lot of matters to anticipate when entering the construction industry for the first time. One important consideration that sometimes slips through the cracks is the use of surety bonds. Unfortunately, new contractors are often unfamiliar with the bonding process, which includes undergoing finance and credit checks, providing upfront collateral, and paying issuance fees. Being aware of bonding regulations within the construction industry can help a new contractor keep on track.\u00a0Building Maintenance York County | Central Penn Contracting Services<\/a>\u00a0is the trustworthy contractor.<\/p>\n

How construction bonds work<\/strong>
\nSurety bonds offer financial protection similar to insurance, although there is a distinct difference in how they work. While insurance policies are written with the understanding that some claims will be made, surety insurance<\/a> bonds are written to prevent fraud and other potential problems\u2014with the intention of avoiding claims. This is why the bonding process can be strenuous for new contractors\u2014the surety provider wants to make sure he is backing the work of a reputable professional who won’t perform inadequately.<\/p>\n

Construction bonds work like other surety bonds, but they apply to stakeholders in the construction industry. Most construction projects require contractors to secure one or more bonds before beginning work. Each individual bond acts as a contract between three entities:<\/p>\n

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  1. The principal<\/strong>\u2014(usually) a contractor who needs the bond before beginning work on a project, thus guaranteeing the quality of his work<\/li>\n
  2. The obligee<\/strong>\u2014the entity (typically a government agency) that requires the bond, thus receiving its legal financial protection<\/li>\n
  3. The surety<\/strong>\u2014the agency that issues the bond to the principal, thus guaranteeing the contractor’s work to the obligee<\/li>\n<\/ol>\n

    Construction bond regulations<\/strong>
    \nRegulations regarding the use of bonds in the construction industry vary depending on the specific jurisdiction in which the project is to be completed.     The Miller Act<\/a> requires the use of bonds on all public construction projects that exceed $100,000. The law mandates the use of two types of construction bonds:<\/p>\n