5 Ways to Easily Lower Your Surety Bond Rate
For contractors and business owners in a wide range of industries, surety bonds are an unavoidable part of operating their organization. However, that doesn’t mean they are forced to take on high-cost bonds which can cost hundreds or thousands of dollars more than what is necessary. The key to securing low-rate surety bonds is being informed about the process and knowing what is taken into account when determining your cost. Here are a few things to be aware of before you approach a surety company looking for a bond:
1. Check your credit
The first thing any surety company will do when you walk through the door is run a credit check on you and/or your company. Just like having a good credit rating can get you lower interest rates on car loans, they can also get your company lower costs for bonds. Before applying for a surety bond, check your credit and make sure everything is correct and up-to-date. One or two bad marks can deliver a serious blow to your overall rating. Fortunately, reporting errors or mistakes can generally be cleared up with just a few phone calls.
2. Balance your books
A large part of bonding consideration, especially when it comes to contract bonds, lies in whether or not your company has the capital necessary to complete a job. Have your in-house accountant comb through your company’s financials to make sure you actually have sufficient funds to see the contract through. If necessary, free up capital by selling off investments to keep a majority of funds liquid and easily accessible. Following responsible accounting practices at all times will ensure that you are able to present an accurate picture of your company’s assets to a bonding company.
3. Toot your horn
Having a well-established network of references and contacts can go a long way to getting you a lower bond rate. The amount of experience a company has in the industry where they are seeking work weighs into their overall credibility and reliability to carry out the contract. To apply for a bond, ensure you have proof of previous work which has been completed satisfactorily.
4. Make your choice
Different bonds come with different rules and regulations associated with them. The sheer number of different bond types can be overwhelming, so consult a professional to ensure you are applying for the bond best suited to your company. In many industries there are well-established standards for the kind of bond necessary, but new business owners may need a unique bond specially-tailored for their operation.
5. Read your rules
Bonding guidelines can vary widely by state, but some basic online research should give you a good overview of what you are required to obtain. Unfortunately, you don’t get brownie points for securing a surety bond worth more than your state’s required minimum amount. Save yourself additional costs by knowing the exact amount of bonding you need to operate in your state and locality. You can find this information online or call your state’s licensing board for details.