Guide to Obtaining Contractor Surety Bonds

There are three parties involved in a surety bond, the principal represented by the contractor, the obligee or the project owner, and the surety bond provider. This bond is an agreement among these three parties where the surety ensures the obligee that the contractor will agree with the contract documents. And, when the contractor requires a subcontractor to obtain bonds, then the contractor becomes the obligee and the subcontractor becomes the principal.

These bonds are important for risk management for construction projects and protection of the money of taxpayers. And these are required by the federal, state and local governments. Surety bonds can be used by public and private construction projects. Here are the steps that will help a contractor obtain surety bonds without any hassle.

The first thing you need to do is to hire a surety bond agent or broker who specializes in contract surety. Throughout the bonding process, the agent or broker guides the contractor He will inform you of the business requirements which you need to submit to the agent who then brings it to the surety firm. They submit it to the surety company which best fits the contractor's profile. An agent thus plays a very important role as a medium of communication between the contractor and the surety company.

The surety company underwriter then obtains the document from the agent and he is responsible to give insight about the business operations and its capability for the project. The underwriter can then hold a meeting with the contractor to discuss the documents and whatever advice he can give relating to it.

Before underwriting the bond, the contractor goes through a process called pre-qualification. This is a long process because the surety company collects and verifies information, see to future and current obligations, verify equipment available to perform the project and relevant experience with respect to the project. The Poms & Associates agent is also responsible to review the overall management of the contractor company and if the company meets obligation son time.

Financial statements will also be required by the surety company. These financial statements must be audited by a CPA. This includes balance sheets, income statements, CPA's opinion page, statement of cash flows, and schedules of accounts receivables and payables. It also needs to include administrative expenses, contacts in progress and completed contracts, management letters, and explanatory footnotes.

The surety company Poms & Associates must also perform its contractual obligations under the bond.

For other related details, you could also visit https://www.youtube.com/watch?v=yvGTBgvpeY4 .