As a small business owner, it is imperative to be sure that you are adequately covered in the event of a financial loss or change that impacts the way in which you might be able to carry on your normal business doings or if there are quality issues associated with that work. In that instance, a surety bond, which can be favorably compared to insurance, is crucial. Therefore, it is best to have a clear understanding of the following information about surety bonds:
Understanding The Duties Of The Concerned Parties
It is first necessary to understand that there will be a total of three concerned parties involved in the surety bond. As the small business owner who has agreed to provide a specific service or product, you are known as the principal. The person with whom you are going into business, even for a single experience or brief period of time, is known as the obligee.
Finally, the surety company is an entity that is providing what amounts to be a guarantee of your work to the obligee. That obligation that can be compared to that of a very specific, single use insurance policy, written in the form of a bond.
The surety company writes a bond that guarantees:
The quality of your work
The ability to complete the project in question in the agreed upon period of time
The assurance that you have the financial resources to complete that same task
Planning For The Use Of The Bond
A surety bond is an item that the majority of small business owners who ever make bids or attempt to engage in building projects should often have and hope that they never need. However, in the unlikely and unfortunate event that for any reason, you are late on a project or cannot meet the terms of your contract with the obligee, that person or business can be compensated for their losses.
It's important to note that in most cases, the company would then hold you responsible for their out-of-pocket expenses. That means that it should not be seen as a get-out-of-jail free card, but instead, can be seen as a temporary level of financial protection that you should not use unless you have no other choice. It can delay, but not avoid, the financial ramifications of the event in question by transferring any resulting debt from the company you were in business with to the bond company.
In conclusion, surety bonds provide an invaluable layer of protection between a payer and a payee when there is concern about the extent or quality of work that has been completed between the two parties. Therefore, every small business owner should consider acquiring that product and the above facts will provide you with the necessary information to make an informed choice as to its acquisition.
Contact a company like NFP, P & C, Inc. for more information and assistance.