Contract bonds are guarantees that a contractor will abide by the specifications of a construction contract. A construction bond assures a project owner that a contractor will perform the work properly 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. We can bond contractors for up to $5 million projects. Our bonded contractors are usually supported by bank lines of credit, pay their bills promptly and have good customer references.
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 contract terms.
- Performance bonds guarantee faithful performance of the terms of a contract for construction or furnishing of supplies.
- Payment bonds guarantee payment for labor and materials used in the work the contractor is obligated to perform.
- Maintenance bonds guarantee against loss because of defective workmanship or materials used on a construction project.
The bonding process
“Bonding” is what we call the vetting process for contractors seeking a contract surety bond. Before a contract surety bond is issued, the contractor is evaluated and qualified to assure the project owner that the contractor has the resources and capacity to perform the contract according to its terms and conditions.
The financial statements
Many surety companies have 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.
The underwriting process
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. For underwriting, our vetting 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.
Contact an agent today to learn more and apply for the contract bond that suits your needs.