You’ve heard of companies that are licensed, insured, and bonded. Have you wondered if your own small business should be too? It helps to understand what a bond is and how it can help your business.
What is a Bond?
A bond is a guarantee between three parties: you, a customer or client that you’ve promised to do work for, and the insurer. It is, essentially, a promise that you make that you’ll do the work you’re hired to do at the acceptable standards and in a reasonable timeframe.
Because of the way bonds are structured, they’re popular with service-oriented businesses like contractors, plumbers, electricians, and more. But nearly any business can be bonded. Different businesses, however, will need different types of bonds.
If you do not meet your obligations, per the type of bond you’ve purchased, the customer or client can file a claim against the bond. This protects them financially from incomplete or poor quality work and even employee dishonesty.
Types of Bonds
The type of bond you purchase is largely dependent upon the type of business you run and the risk you want to guarantee against.
Contractor Bonds: These are the most common types of bonds that contractors purchase. This shows clients and customers that your work will be done well, on time, and comply with state and local regulations. When a contractor, plumber, electrician, and other service provider says they’re licensed, bonded, and insured, this is the bond they have.
Performance Bonds: Performance bonds are required any time you want to bid on a public project. It’s a promise that you’ll do the work laid out in your original bid. It’s one of the most common types of bonds for the construction business.
Maintenance Bonds: A maintenance bond isn’t the same as a warranty, but it’s close to it. This states that your work is guaranteed for a certain amount of time after it’s completed. It’s also required for all public projects.
Fidelity Bonds: Any business that brings your employees in contact with customers’ money or possessions can benefit from a fidelity bond. Employee dishonesty bonds protect your business and your customers from theft, forgery, embezzlement, and burglary. Business services bonds protect against damage or loss of money, personal belongings, supplies, or equipment.
While certain small businesses may need contractor, performance, or maintenance bonds, almost all small businesses can benefit from fidelity bonds.
When you’re ready to bond or insure your small business, give us a call.