Performance and Payment Bond

Performance and Payment Bond

Around the nation contract owners are looking for extra assurance that their contactors will complete their projects and ensure payment to any subcontractors, suppliers and/or vendors before they will sign a contract.  So in addition to standard liability insurance, they will often also require a payment and performance bond in the full amount of the contract.

So what are they? A performance bond is meant to fulfill the contract within a specified time frame, which is why evaluating the liquidated damages part of the contract is so important.  

While the payment bond will guarantee that all subcontractors and suppliers are paid by the contractor. This protects the owner from any lien or lawsuit that may be filed if there is any kind of payment dispute. This is also referred to as a labor and materials bond.

More often than not, if the contract holder (or the Obligee) requires the payment and/or performance bond(s) to execute a final contract, they will also require all bidders to post a bid bond with their bid package. Usually the bid bond is required at a value of 5-10% of the total bid. This bond lets the owner know that the contractor is qualified to complete the project, if awarded the job. The bid bond is essentially a prequalification for the payment and/or performance bond(s).

General contractors may also require their subcontractors to “bond back” – meaning they will require bonds for their subcontractors as well to reduce their liability for the subcontracted work.

At Worldwide, we have options for contractors at all stages whether this is their first time being bonded or if they have outgrown their current program. Give us a call and speak with one of our experienced underwriters for more information.

For projects under $450,000 you can use this application. The surety will also need to review a copy of the contract if it’s for a final bond or bid specs if it’s for a bid. If you don’t have a copy of the contract or bid specs, its ok send us what you have. You can even use another application from a different broker or surety company. 

Projects under $450,000:
1.    Application
2.    Copy of contract 

For projects over $550,000, the surety will need to review business financials and a few other items.   

The Surety will need the following information:
1.    Application 
2.    Year-end business financial statement (Balance sheet and profit and loss)
3.    Current business financial statement (Balance sheet and profit and loss)
4.    Accounts Payable and Accounts Receivable 
5.    Current work on hand
6.    Personal financial statement
7.    Copy of the contract

For specialty contracts, clients that have financial issues and credit issues. 
We have access to the SBA. If you fit in this category we will need the following information:
The Surety or the SBA will need the following information 
1.    SBA Application 
2.    Year-end business financial statement (Balance sheet and profit and loss)
3.    Current business financial statement (Balance sheet and profit and loss)
4.    Accounts Payable and Accounts Receivable 
5.    Current work on hand
6.    Personal financial statement

With any type of bond always feel free to send what you have or call us. We want to help and make this as easy as possible for you. 

If you or your business needs help in obtaining a surety bond or commercial insurance give us a call!