Tuesday, August 7, 2012

How is the Cost of a Surety Bond Calculated?

Most people don't just get up in the morning and say to themselves, "Man, I really want to go online and shop for a surety bond today." The truth is, if you're reading this article, most likely someone is requiring you to get a surety bond for some type of business or service. Maybe you want to start a freight broker business. Or maybe you're a used car dealer, a contractor in need of a performance bond, or some service business such as janitorial company. When you discovered that you were required to obtain a surety bond, you may have asked yourself, "what does a surety bond even cost?"

When calculating the surety bond cost, it is useful to first understand all the parameters that go into creating a bond quote. The reason you need a surety bond in the first place is because you are involved in a business situation that entails some element of potential damage or loss if your obligations are not met. In other words, there's risk involved in the activity for which the surety bond is required. One of the main elements of this risk is your credit rating. For someone with good credit, for example, the surety bond costs can be less than 4% of the bond amount. But, with poor credit ratings, the price of the bond can be very high, as much as 25% of the face value of the surety bond.

As an example, a California contractor's license bond typically has a face value of ,500. So a contractor in California with good credit would pay roughly 0-500 for this surety bond. The actual price might range from 0 to 0.

It is very hard to give rough estimates for bad credit surety bonds, but there are several companies that can provide surety bonds for individuals with bad credit. Bad credit surety bonds, however can cost up to 20-25% of the bond face value. In the example of the California contractor license bond, that means that the cost of the surety bond could be over 00 for someone with poor credit. For this reason, it is imperative that individuals with poor credit engage an expert to make sure they get the best possible surety bond quote.

Obtaining a surety bond quote is very easy. You simply need to submit your personal information to a surety bond agency and answer just a few questions. Because of the importance of credit history in the application process, it is vital that the surety bond broker obtains your personal information in order to perform a credit history check. The application process only takes a few minutes. After the application is received, you can usually get a surety bond quote back in a few hours or less, but rarely does it take more than 24 hours.

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