Three Ways Contract Bonds Reassure Clients

As a construction professional, you know that you frequently have to buy surety bonds before working on certain projects. But why is bonding important? The most direct answer is that contractor bonding gives your clients peace of mind. When clients know that the construction firm they're working with is bonded, it reassures them in three major ways.

1. Being bonded shows clients that you comply with government regulations.

Countless government agencies require construction professionals to have a contractor's license before they can work in certain areas. You can use your licensed and bonded status as a way to market your firm. Informing clients that you're licensed and bonded reassures them that your firm is in good standing with government agencies at both the state and local levels.

2. If you don't do your job, bonds give clients a way to collect reparation.

Every time you purchase a contractor bond, whether it's for general licensing purposes or for performance on a specific project, you're binding yourself to a legally enforceable agreement that says you'll do your job according to law. If you fail to meet the bond's terms, the harmed party (a.k.a. your client) can make a claim on the bond to gain reparation. If the claim is found to be valid in a court, the bond's legal language will require either yourself or the surety to pay the harmed party compensation. Therefore, clients have nothing to fear when entering into a project contract with a construction professional that supplies the proper surety bonds.

3. The bonding process keeps unqualified contractors from working in the industry.

Getting a contract bond isn't always easy. Surety providers, government agencies and consumers all know this. One of the major purposes of the bonding process is to weed out individuals and firms that don't have financial stability. For example, if a claim should be made against a large bond that's maintained by a single contractor, he might not have the funds needed to pay reparation, which would leave the surety footing the bill.

Surety providers usually avoid bonding risky principals, such as those who have limited funds or poor credit scores. As such, the surety bond process might seem unfair when it keeps small construction firms from working on bigger projects. However, it's generally considered an effective evaluative method that keeps unqualified individuals from gaining access to a position through which they might cause others harm, whether physically due to shoddy work or financially due to unfinished work. When you're bonded it shows clients that a neutral third party (your surety provider) evaluated your business and found it to be financially stable.

Danielle Rodabaugh is a principal for SuretyBonds.com, an online surety bond agency that issues surety bonds nationwide. As a part of the company's ongoing educational outreach program, Danielle writes informational articles that help construction professionals better understand surety bonds.

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