A surety bond is a contract between two parties, principal and surety. The principal agrees to perform an act and purchases a surety bond to guarantee the performance. Should the principal fail to perform as promised, the obligee can pursue legal action against the surety and recover a monetary judgment. Commercial surety bonds are one of the most popular types of bonds. They do not protect an individual, rather business activities and/or relationships are protected from losses inflicted by a bond applicant. Commercial surety bonds require an additional level of trust beyond that which is required in regular commercial transactions. In order to provide this high level of trust, surety companies and agencies have come up with a number of innovative ways to ensure the bond claims are resolved properly.
A commercial surety bond can be an important part of a business plan when it comes to getting financing or opening a new office. Before you consider purchasing one, do your homework on whether the bond is required and exactly what kind of bond will protect you in the event of any legal problems. Also be realistic about your plans to obtain financing, because some bonds can take several weeks to process. For more detail, please refer to the info-graphic below.
