Your Guide to Performance Bonds
What is a performance bond?
Performance bonds are a guarantee that a contractor will complete a construction project according to the agreed upon contract.
What are performance bonds used for?
When a developer wants to protect the investment made in a venture, the contractor that won the bid is required to provide a performance bond before work can begin. If the contractor fails to complete the project based on the previously agreed upon contract, the project owner can file a claim on the performance bond. If the claim is found to be valid, the surety company that issued the performance bond will make sure the contractor compensates the harmed party.
Performance bonds are often issued in conjunction with payment bonds, and together they are among the most common construction bonds in the industry. To get a free, no-obligation quote for your performance bond, apply online or give one of our performance bond experts a call at 1 (800) 308-4358.
Get Your Performance Bond Fast and For a Low Rate
Your premium will vary for a number of reasons including the project’s bid amount, your financial credentials and your past work history.
Qualified contractors who work with SuretyBonds.com typically pay a rate that’s just 2.5%-3% of the performance bond amount. This means if you’ve been contracted for a $100,000 project, you could pay just $2,500 to $3,000 for your performance bond.
How to Apply for Your Bond Today!
Standard application questions for performance bonds include:
- How much is your bid?
- When is the bid date?
- Have you ever been bonded before?
- How long has your company been in existence?
- What is your personal credit score?
If your project will be contracted for more than $250,000, you’ll have to provide additional financial credentials when submitting your application. Once financial records have been reviewed, the application has been approved and payment has been received, your underwriter will issue the bond. Apply for your bond now!
Learn About Surety Bonds in Construction
The Federal Miller Act mandates the use of contract surety bonds for all public construction projects exceeding $100,000. However, some laws at the state, county and city level mandate their use on public construction projects that cost much less. Although they aren’t required by law, many private project owners also require contractors to provide contract bonds. As their name suggests, each contract bond binds three entities together in a legal contract.
- The principal is the contractor purchasing the bond to guarantee performance quality.
- The obligee is the government agency or another project owner requiring the bond.
- The surety is the underwriter issuing the bond, thus guaranteeing the owner the successful performance of the contractor.
By bringing a neutral third party - a surety - in to execute the agreement, this process reassures the performance bond will guarantee rightful compensation to those involved with the project.