A Performance Bond is one of many types of Surety Bonds that Seaman’s Insurance Group, St Augustine’s, Jacksonville’s and the Florida Keys’ Premier Boutique Independent Insurance Agency has years of experience to share in order to help you with your bonding needs.
If you were to look up what a Performance Bond is, you might find the following definition: “A bond issued by a bank or other financial institution that guarantees the fulfillment of a certain contract.”
Well, that doesn’t tell us much, does it?
A Performance Bond, aka a Contract Bond is a type of Surety Bond where the Surety (could be a bank or insurance company) guarantees that a contractor will complete a project up to a level of expectation (satisfaction) of specifications in a contract. The types of jobs that a contractor would need a Performance Bond (Contract Bond) are jobs that require a Bid Bond.
Many Surety Bond Companies offer to package together the Performance Bond and the Payment Bond. They tend to go hand in hand with each other.
A Payment Bond is a type of Surety Bond that guarantees that all of your sub-contractors, suppliers and laborers working on your project will get paid. Every once in a while, a Payment Bond may be required when a Performance Bond might not be.
Now that we have established what a Performance Bond is and what other types of bonds might be needed along with the Performance Surety Bond, you may be wondering what it takes in order to get a Performance Bond aka Construction Performance Bond.
Performance Bonds require business financials be submitted including a balance sheet, income statement, cash flow statement, complete notes/disclosures and work schedules.
It may also be possible to get approval for a Performance Bond using your tax returns or financial statements assuming your personal credit is acceptable. Using these documents to get approved for a Performance Bond you may find that you might not be able to qualify for the larger contracts.
When it comes down to it, Financial Statements prepared by a CPA are preferred by a Surety Company.
It is also important to keep in mind that Performance Bonds, Contract Bonds and Bid Bonds are all Surety Bonds, not insurance policies. As opposed to insurance policies, if the Surety ends up paying out, you are responsible for reimbursing the Surety for its losses.
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