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Also known as construction bonds, contract bonds are guarantees that a contractor will abide by the specifications of a construction contract. This includes performing the work properly and paying specified subcontractors, laborers and material suppliers.
“Bonding” is the vetting process for contractors seeking a contract surety bond. Before we issue a contract surety bond, we evaluate the contractor’s qualifications. Ultimately, we want to assure the project owner that the contractor has the resources and capacity to perform the contract according to its terms and conditions.
Many surety companies have stringent financial reporting requirements for contractors, such as requiring contractors to provide CPA-prepared financial statements. In some cases, we accept alternate forms of financial statements, such as in-house prepared statements and income tax returns. For new contract bond submissions, we require the 3 most recent year-end business financial statements and a current year-end personal financial statement for each owner.