A Payment bond held by an owner or general contractor can impact what a subcontractor’s recourse will be in the case of non-payment. That is why it is always a good idea to find out at the beginning of a project if anyone responsible for the contract has taken out payment bonds or any kind of performance bond on the project. This is true whether a private or public project, but it is important to be aware that even a private construction project can come with payment bond requirements these days.
Payment Bonds on Private ProjectsBecause the use of payment bonds before the recent economic upheaval was relatively rare for private projects, it is important to understand if a mechanic’s lien or court action can be avoided with this bond. When times are good many project owners and general contractors don’t feel the need for these bonds. Now many projects require them.
Public projects have rules regarding collecting on bonds or civil actions, as set out in The Miller Act. However, when it comes to a private project the terms of the bond will govern. That is why it is important to ask and understand exactly what kind of payment bonds are related to the project and under what conditions they become enforceable. There are a few things you can generally expect, however, including:
- The bonds will lay out specific notice requirements
- The notice will most likely be required in the form of writing
- Written notice will need to go to specific parties outlined in the bond
- These parties need to receive written notice within a specific timetable
- All requirements must be fulfilled to act on the bond
Where Contracts RuleMany states, such as Virginia, specify that the contract supersedes all other agreements. It is vital to know if your state is one of these as that will affect your ability to enforce the bond. When this is the case, the terms of the bond cannot be outweighed by other legal considerations or interests. This is because any surety bond including a payment bond is a contractual obligation. So make sure you have a copy of that surety bond before you start the project.
Getting Bonded CorrectlyOf course, it always helps if you have a reliable surety bond company like BuySurety to go to when it comes to payment bonds or clarifying your bond requirements. BuySurety is an experienced surety bond company. We have been providing everything from contractor license bonds to bid bonds and payment bonds since 1998 to a wide variety of businesses. Whether you are a small contractor just starting out or a large national company with wide-ranging projects, we can provide the exact surety bond to suit your needs at a price that is within your budget. Come by the BuySurety site to see just how fast and easy it is to get bonded with BuySurety today.
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But that doesn’t mean that your small business can’t qualify for those important and business building surety bonds. Here are a few tips to help you understand why these small business surety bonds are so vital to your financial health and how to improve your chances at qualifying for them when the project or opportunity arises that require one.
Why Do I Need a Small Business Surety Bond?For many small business owners the first question is why they want to try and qualify for any kind of small business surety bond such as a performance bond or a payment bond. As the economy recovers many city state and federal government projects are seeing new life and increased funding. These types of lucrative projects, whether it is as a contractor providing laborers for construction or a local provider for schools, will require a guarantee of your ability to deliver what you promise. In the case of a performance bond, it will guarantee that you will perform according to your contractual agreement on the project. When it is a payment bond, you are guaranteeing that subcontractors and suppliers that you bring in will be paid according to the contractual schedule. Since most if not all government project require these guarantees, if you want to be able to bid for this type of work, you will need to qualify for bid surety bonds, performance bonds and even payment bonds if you act as a contractor with subcontractors and suppliers. As the saying goes, any money you leave on the table isn’t yours when you head home, so why leave this growing and important sector to the competition?
Qualifying for that Surety BondOf course, the big hold up for many is simply qualifying for a surety bond if you have never done so before. For a brand new small business, surety bond qualification may seem beyond you, but it doesn’t have to be if you plan for it. The key is to work closely with your financial adviser and have these four items in mind as you prepare to qualify for a small business surety bond:
- Working Capital – You must be able to demonstrate your ability to raise adequate capital for future projects. This means your current assets minus your liabilities must always be top of mind when planning.
- Banking Relationships – Do you have a strong relationship with your bank? This is the kind of qualification that takes time to work on, and is worth the time you do spend. Talk to your financial adviser about the best way to approach this.
- Strong Job History – Even if you are just starting out, you can point to the success of what has been done before. Work-in-progress that is timely and within budget, bid results that show your ability to keep your promise and how much work you have in the pipeline are all part of this equation.
- Cash Flow- This one is vital since the majority of times a surety bond is called in to complete a project it will be because the bond holder has had a cash flow problem. Take a hard look at your own current cash flow situation and if it isn’t up to snuff, discuss with your financial adviser what you can do to change that.
Tags: bid bond, bid bonds, commercial surety bonds, contract bonds, get a surety bond, get bonded, Performance Bond, performance bonds, performance surety bonds, post a surety bond, SBA Bond Program, small contractors, surety bond definition, what is a surety bond
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Payment Bonds Protect All PartiesThere was a time when any contractor who could get onto a government-funded infrastructure project deemed themselves lucky. The payment was guaranteed and it generally was generous enough to make any other problems worth your while. But the collapse of the economy during the crash of 2008 changed all of this. With both federal and state governments scrambling to put together funding for basic overhead and operations, shoring up the crumbling infrastructure is often shoved to the end of the list. This makes any bid by a contractor for such a project risky, both for the contractor and the subcontractor. Add in the risk for taxpayers when an infrastructure project is halted mid-stride because of a funding problem and you begin to see that everyone needs a solution to ensure the completion of these important projects. Enter the partnerships between private business and public entities and the payment bonds that protect them.
Why P3 Projects Make SenseSo why encourage a partnership between public and private entities at all? The reason is both simple and complex. Let’s say that your local public entity needs major infrastructures such as light rail transit, a new hospital or restructuring of local highways to be addressed. Bringing in private expertise on these projects can help to ensure that the project is done with the latest technology and techniques using innovative solutions. With a P3 project, it also means that the private company will take on some of the risk for the project. But like every project, this may reduce risk but it can’t eliminate unforeseen problems. That is where the payment bonds come into play.
Reducing Risk with Surety BondsThe very nature of a surety bond such as a payment bond ensures that the project is done on time, on budget and is not held up by unforeseen cash flow problems. One of the most common phone calls surety bond companies like BuySurety get on a project is that Friday afternoon call to help make the payroll. Unforeseen cash flow problems may be temporary but when they happen they can stop a project in its tracks. With payment bonds connected to a P3 project, the work continues. Even if a contractor runs into a different problem, he can call the surety company to help with expertise that ensures the completion of the project on time and on budget.
BuySurety Payment BondsWith the ability to issue payment bonds for projects anywhere within the 50 states, BuySurety is the place to go for your next surety bond. Whether you are a contractor bidding on a public project, a private company considering a public/private partnership on a P3 project or a public entity that needs a surety bond to protect taxpayers, we can help. BuySurety has been issuing surety bonds for projects of all sizes and types since 1998. Call our informative customer service agents today or come by our site and find out just how fast and easy it is to eliminate that risk with surety bonds from BuySurety today.
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Delaware Surety Bond Bill Moves QuicklyThe bill moved through The House in record time. HB 92 was introduced to The House on April 25th and immediately sent to the Housing and Community Affairs Committee where it passed within five days. By May 2nd an amendment was added and approved and the new bill was passed with no dissenting votes. It was introduced to the Senate and immediately assigned to the Community/County Affairs Committee. Within two weeks it had passed the committee and been approved as stands. On June 11th it was voted unanimously to pass by the Senate and sent to the Governor for signature.
Surety Bonds a Safe Bet for LandlordsWith the quick passage of this bill landlords will have a new way to ensure that the costs of damage to properties will be covered, and do so without the problem of having a separate account for security deposits. When the landlord decides to accept a Delaware surety bond as a security deposit they will know that the recovery costs are guaranteed and the tenant is in good financial standing. This is a great example of how a surety bond can help business transactions from all walks of life by providing safe financial security.
BuySurety Provides Bonds FastWhether you are a Delaware landlord who needs a surety bond for a new tenant or a renter looking for a good price on a Delaware surety bond, we can help. BuySurety has been providing all types of surety bonds for a wide variety of businesses since 1989. Let our friendly and helpful customer service reps help you to find the surety bond that fits your needs. Surety bonds from BuySurety are the best solution to any security deposit needs, no matter who you are or what you need. Let BuySurety take the work out of getting bonded today.
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House Bill No. 503: Payment BondsHouse Bill 503 changes the type of contractors that will no longer be exempt from requirements for a preliminary notice regarding payment bond claims. The new types of contractors that will no longer be exempt include temporary labor services, professional employer companies or organizations or any entity that provides labor either temporarily or as a full-time contract. This bill was enacted on March 22, 2012 and went into law July 8, 2012. For a reading of the complete text to please follow the link provide in this summary.
Senate Bill No. 77: Permit Bonds—Oil & Gas WellsUtah Senate Bill 77 will extend the current requirements of a performance or surety bond by gas and oil well operators to surface landowners to now apply to additional losses. These losses can include unreasonable loss of crops or the value of the existing improvements or permanent damage to the surface land owned by the surface landowner of the property. However, if the surface landowner is a successor or party to a lease of the oil and gas, has signed an agreement of surface use or fulfilled a contract or waiver releasing the operator from liability regarding the use of the surface land, that surface landowner will not be covered by this bond. This bill was enacted on March 22, 2012 and went into law on July 8, 2012. Anyone wishing to read the entire text of Utah Senate Bill 77 can do so by following the link provided in this bill summary.
Senate Bill No. 144: License Bond—Immigration ConsultantsWith the passage of Utah’s Senate Bill 144 immigration consultants will be required to post a $50,000 immigration consultant bond when they register with the Division of Consumer Protection unless they are employees of a nonprofit tax-exempt corporation. The registration and bond posting is to protect against fraud, misstatement, misrepresentation or any unlawful acts or omissions or the failure to provide the service of an immigration consultant. Should the consultant’s registration be revoked the bond will be forfeited. This bill was enacted on March 23, 2012 and went into law on July 8, 2012. For a review of the full text of Utah Senate Bill 144 please follow the link provided in this legislative summary.
Senate Bill No. 153/Senate Bill No. 114: Protest BondsThe Utah Senate has passed a set of bills, SB153 and SB114 that will create the requirement of a surety bond posting under the following circumstances:
- To protest the award of a contract, with bond placed as security of the award decision
- To protest the procurement or appeal of a debarment, with the bond requirement of $1,000
- To protest an award for a bid or RFP, bond to be equal to 5% of lowest bid
House Bill No. 191: License Bond—Real Estate Appraisal Management CompaniesWith the enactment and passing of Utah House Bill 191 all real estate appraisal management companies will be required to post a license bond for a minimum of $25,000. The bond amount will be determined by the Division of Real Estate of the Department of Commerce. The bond must be issued by a company that is authorized to do business in the state of Utah. The bill was enacted on March 19, 2012 and went into law on May 8, 2012. To see the full text to Utah House Bill 191 please follow the links to the legislative information provided in this summary.
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