Bad Credit Surety Bonds

Principals that have low credit scores, bankruptcies and/or limited experience in their industry might think they won't be able to qualify for the surety bond they need. Fortunately, surety bond providers offer special programs for applicants whose financial records fall short of preferred industry standards. Bad credit surety bonds are available for those who have less-than-stellar financial histories.

Surety providers that issue bad credit surety bonds must be willing to work with clients who are slightly riskier than the typical surety bond principal. Some surety providers specialize in bad credit surety bonds, which allow almost any applicant to qualify for the needed surety bond.

Bad credit surety bond costs

The final bad credit surety bond cost will depend on a host of factors, including the applicant's financial standing and specific type of bond that's sought. Calculating the cost for a bad credit surety bond will producer a higher rate than it would for a conventional bond because sureties take greater risks in backing the work of principals that could be financially unstable. Bad credit surety bond rates can range from 5 to 20 percent of the bond's penal sum, depending on the individual applicant and the surety's underwriting capacity.

Bad credit surety bond collateral

Due to the increased risk associated with bad credit surety bonds, some surety providers will require an additional form of collateral to be provided along with the bond's premium. This is frequently a cash collateral equal to the full penal sum. Whereas insurance providers expect claims to be made on policies, surety providers try to avoid any possible claims. Because surety providers don't consider financial losses when writing their premiums, they must ensure that principals have the financial means necessary to provide compensation if a claim should be made on a bad credit surety bond.

Financing

Surety providers can offer financing plans to those who will pay high premiums for their bad credit surety bonds. Financing can be especially helpful for small business owners who might not have the financial history they need to get a competitive surety bond cost. Unfortunately, choosing to finance surety bond payments means principals will pay more for their bond in the long run. So while financing might be a helpful option for some who purchase bad credit surety bonds, they should know it would be cheaper to pay for the bond with one payment.

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