Okay first up folks, I know what you’re all thinking, “this is a boring topic and boring post.” Well I am here to tell you right out of the gate that you are wrong! This is an exciting post because bonding requirements can literally mean the difference between you being booked SOL or having more work than you can handle. So you need to understand what the construction company bonding requirements are for your company in order to make sure you don’t get left out in the cold.

First off let’s start with the basics and define what exactly a bond is. Well a bond is a form of insurance that protects not only your company, but your clients as well. How it works is that if a creditor makes a claim on your bond and it is verified as legitimate, your bonding company will payout the amount that they owe. So let’s say you are given a $300,000 bond for your company, then someone comes forward and claims that you did not finish the work correctly on one of your jobs and you owe them $20,000. If the claim is legitimate your bonding company will cut them a check for $20,000 and then bill you the $20,000 for repaying them.

Now you might be wondering why your client would ask for bonding. Well that is because only clients have noticed you do shoddy work. Your bonding company on the other hand notices that you have done shoddy work. They are the ones who will not renew your bond and then you are left with no choice but to go out of business. So as you can see from this little explanation. A bonding is never a bad thing for you or your client as it serves to push you to do quality work and not be a shitty construction company.

Okay so now you know what a bond is, let’s cover the major types there are for construction companies. The first major bonding requirement is a bid bond. This is mostly just a “showing” or a way for your client to confirm that you can actually pay for what you are bidding on. There is not major obligation for a bid bond.

The second major bonding requirement is a performance bond. Your performance bond will provide compensation to the owner of the project for all damages that you cause during performance of the contract. Most contracts can only go after the amount of the bond. So they can not get you for more than that.

The third major bonding requirement is a payment bond. A payment bond is basically superior to a performance bond in the fact that if you don’t pay the people you used on the job, then the owner can be paid out of the bonding company.

The forth major bonding requirement is a maintenance bond. A maintenance bond holds you accountable for fixing issues with the work you just completed. So again if you don’t maintain the work you completed, the bonding company will make sure you do.

Okay so you now have a general idea on what the bonding requirements are for construction companies. Now that you have the basics, click on this link to read more about the bonding requirements for your construction company. This will help you avoid the pitfalls described in the above section. Happy reading!

For more information on bonding and its importance in the construction industry, you can visit this Wikipedia page.