More business, are applying for surety bonds, does this mean that the recession is over? In this last quarter surety applications went up for the first time in almost two years. This is a good sign for the economy, since bonds are required for new businesses as well as existing businesses. Construction bonds went up too showing that the construction industry is slowly coming out of a slump. Hopeful these trends will continue and America’s economy prospers once more.
Who benefits from Bonds?
A surety bond is an unsecured loan in force to protect a third party or parties named the obligee. The State in most cases is acting as the obligee on behalf of its citizens. The state requires bonds to be drafted to protect the individuals or companies that transact business with the principal bond holder. Most professional regulated businesses are Surety bonding required to satisfy this requirement before they can obtain a license. Contractors, Car Dealers, Mortgage Brokers are all required to obtain bonds. In some states Sales tax bonds are required for every business. Surety bonds have been around for thousands of years, they are the oldest form of Insurance.
Where do you get Surety Bonds?
In order to obtain a bond the principal must first fill out an application with a Surety Company. The next step is to find a Surety Company that will write the risk. Make sure that the Surety is licensed and rated for the State you’re applying for the bond in. Your best option is to apply for your Surety Bond with Surety Agents. Look for Surety Agents that are not tied down to one company.
Underwriting for Bonds
Applying for a surety bond is similar to applying for a credit card or a loan. Surety Bonds are underwritten like how a bank would underwrite a loan. The Surety reviews the client’s credit, personal financials, business financials, and experience. If the principal has credit issues or if the financials do not meet the liquidity requirements the bond’s rate will be increased.
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