If you're a small contractor trying to break into the world of government contract jobs, you'll need to become familiar with bid bonds. Bid bonds are a way of proving that you're serious about your work, and that you have the funds, and the backing to complete the job if your bid is accepted. If you've never been issued a bid bond before, here's some information that will help you avoid problems with the process.
Know What a Bid Bond Is
Insurance policies usually protect you, the contractor. However, bid bonds are slightly different. Bid bonds actually protect the party that is in the process of hiring a contractor. Once you submit a bid, and the accompanying bid bond, you're certifying that you're ready to start the job immediately if your bid is selected. If you're awarded the project – meaning you've won the bid – and you back out at the last minute, the awarding party can seek damages through the bonding agent. It's important to note that payment of damages by the bonding agent doesn't let you off the hook. The bonding agent could then come after you for the money they paid out on your bond. To protect yourself, you should always be prepared to do the job whenever you submit a bid and a bond.
You Need to Shop Around
When purchasing a bid bond for a construction project, you should always shop around. Like insurance policies, the price may vary between different bonding agencies. To make sure you choose the right bid bond, be sure to speak to the project manager. They'll be able to tell you exactly the type of coverage, and protection, they want through the bid bond. Once you know the coverage details they're looking for, you'll be able to obtain an accurate quote for your bond. It's important that your bond provide the coverage that the government entity is looking for, or your bid, and your bond could be refused.
Your Does Credit Matter
Before you start looking for a bid bond, you need to understand that your credit does matter. The bonding agency will be taking a close look at your personal and business credit. They'll also be looking at the overall financial health of your business. If you have credit issues, or questionable business health, it's best to take care of those matters first, or look for bonding agencies, such as Surety Bond Professionals, that are able to accommodate those concerns.