Contract bonds are used to guarantee that a contractor will abide by the specifications of a construction contract. A contract surety bond assures a project owner that a contractor will perform the work and pay specified subcontractors, laborers and material suppliers.
Nationwide specializes in serving the needs of small to medium-sized contractors, such as electricians, carpenters, masons, plumbers, painters and landscapers. They are usually supported by bank lines of credit, pay their bills promptly and have good customer references. While we can consider contract bonding for contractors that do up to $5 million projects, a majority is much smaller.
Contract bond types
There are several types of contract bonds:
- Bid bonds guarantee that a contractor will enter into a contract, if awarded, and furnish such contract bonds as required by the terms of the contract
- Performance bonds guarantee faithful performance of the terms of a contract of construction or furnishing of supplies
- Payment bonds guarantee payment for labor and materials used in the work the contractor is obligated to perform under the terms of a contract
- Maintenance bonds guarantee against loss because of defective workmanship or materials used in the completion of a construction project
Learn about the contract bonding process
Before a contract surety bond can be issued, the contractor must be evaluated and qualified to assure the project owner that the contractor possesses the resources and capacity to perform the contract according to its terms and conditions. This process is known as contract bonding.
Get the financial statements required with a contract bond
Many surety companies have very stringent financial reporting requirements for contractors, such as requiring contractors to provide CPA-prepared financial statements. In some cases, Nationwide accepts alternate forms of financial statements, such as in-house prepared statements and income tax returns. For new contract bond submissions, we require the three most recent year-end business financial statements and a current year-end personal financial statement for each owner.
Understand the underwriting process for contract surety bonds
Our unique underwriting approach emphasizes personal and business assets, which means we base our underwriting on the total financial strength of a contractor’s business and its owners.
Part of our process for underwriting contract bonds includes calling a contractor’s banker, suppliers and job references to learn more about their business practices. This background check allows us to provide surety credit without strict reporting requirements.