Cinium Blog

Surety Bonds 101: What You Need to Know to Get Your Preferred Subcontractors Across the Finish Line

If you’re like most general contractors, then you want to be successful. And in order for you to be successful, your subcontractors need to be successful.

Most of the time, those hardworking subcontractors of yours need a surety bond to get there.

So what exactly are surety bonds and what do you need to know about them? In this blog post, we’ll tell you what surety bonds are and how they can help you get your preferred subcontractors across the finish line.

What Is a Surety Bond?

First things first, let’s talk about what a surety bond is. A surety bond is a commitment from a surety provider (surety) to pay another party (obligee) an amount of money if the party (principal) doesn’t meet a promised obligation.

To put it differently, the obligee is the entity that requires your subcontractors to get a bond (the general contractor). The principal is the entity that purchases the bond and will be performing the contractual obligation (the subcontractor). And the surety is the entity who assures the obligee that the principal can perform the task (the bonding company).

A contract surety bond is used primarily in the construction industry. It’s a guarantee from a surety company that a contractor (the principal) will abide by the terms of the contract. Contract surety bonds include bid bonds, performance bonds, and payment bonds, which are often required before a contractor starts a job.

What Happens if My Subcontractor Can’t Get Bonded in the Standard Market?  

If your subcontractor has a poor credit score; limited or poor financial history; or is taking on a lot of projects, then they might have difficulty getting bonded in the standard market. In that case, they have to get bonded in the non-standard market.

Getting bonded in the non-standard market doesn’t come free of challenge. Contractors often have to pay a higher bond premium, provide a CPA review of their finances (which can take a lot of time and cost thousands of dollars), and put up collateral (which can rack up debt even more).

What’s the Best Way to Get Bonded in the Non-Standard Market?

Our in-house team of construction experts don’t require a CPA review of financials—instead, we review each individual case ourselves.

We also don’t request collateral. Instead, we ask that contractors use our Project Accounting Service, which allows us to track contractors’ financials throughout the project and ensure that they are making their payments on time and managing their project budget effectively.

This also means that general contractors like yourself don’t have to deal with burdensome liens from vendors, which delay the order of materials and slow down the progress of your job.

Bottom Line  

With our back-office and financial support, your subcontractors can make sure that things run smoothly from start to finish. And in the process, they’re able to increase their bondability and grow their business.

In other words, your subcontractors will be successful—and so will you.

Want to find out more about how bonding through Cinium can help you:

  • Get your subcontractors across the finish line
  • Reduce the risk of your projects
  • And keep your projects free from liens?

Let’s talk.


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