HOW DOES A PERFORMANCE BOND WORK IN CONSTRUCTION?
COUNT ON STOKES SURETY BONDS
Being in the construction industry in Texas is profitable and exciting. With your assistance, Americans will finally be able to move into their dream homes. Corporations can open new establishments.
While construction can be fun and exciting, it comes with many hurdles. It is your responsibility to jump these hurdles so you can help your clients and make money.
One thing you’ll need to do is obtain a performance bond. Without performance bonds, there is a risk that your clients are going to choose your competitors.
Performance bonds give your customers peace of mind and ensure that you’re going to fulfill your duties. Stokes Surety Bonds is here to help. Contact Stokes Surety Bonds so you can obtain the construction bonds you need and start working soon.
TOO LONG; DIDN’T READ (TL;DR)
Once your bid has been accepted by the obligee, you will be required to obtain a performance bond to start working on the project. This bond acts as a financial guarantee that you will complete the project based on the terms outline and within the deadline. If you fail to uphold your end of the agreement, the obligee has a right to file a claim against your performance bond. As such, it is best to avoid any situations where a claim may arise.
UNDERSTANDING PERFORMANCE BONDS
Performance bonds are pertinent to your company and your clients. They give the client a guarantee that you’re going to complete the project on time and as promised. It ensures that the client has a way to fight back should the contractor fail to complete the project. Before you can accept a client, there is a good chance that your company will be required to obtain a performance bond.
So, it is imperative for all construction business owners to know more about performance bonds. At the very least, you should know how they work, how to obtain them, and how they impact your business. Once you’ve learned more about the basics, you’ll easily be able to obtain and use performance bonds to your benefit.
When it comes to construction surety bonds, you will be dealing with 3 parties. You will need to learn more about the principal, obligee, and surety. Once you’ve figured these things out, you’ll understand surety bonds much better.
The principal is the contractor who is required to purchase the bond to guarantee they’ll deliver quality results. As the construction contractor, you will be the principal and you will be responsible for purchasing the performance bond.
Then, you have the obligee and surety. The surety is the bond’s underwriter. This is the company that you’re buying the bond from. They guarantee your performance. If anything goes wrong, the client will file a claim with the surety in hopes of getting their money back.
The obligee is the client. It could be a Texas resident, government agency, or corporation. Either way, the obligee demands the principal obtain the performance bond. It is important to understand these three parties so you’ll know who handles what. Below, you’ll learn more about performance bonds and how they work.
HOW TO USE PERFORMANCE BONDS?
To obtain projects for your business, you’ll need to work with developers. Developers are responsible for finding construction contractors to complete the work. You’ll need to start by placing a bid on the project. This will require a bid bond, here is how you can obtain bid bonds, and the turnaround time for bid bonds.
Once you’ve been selected as the winner, you will need to obtain a performance bond. You cannot begin working on anything until you’ve acquired the performance bond since it gives the developer reassurance that you’re going to get the job completed.
If you fail to complete the project based on the requirements in the contract, the project owner will be able to file a claim against your performance bond. If the claim is valid, the surety company who gave you the performance bond will need to compensate the project owner.
Performances bonds are immensely important to Texas construction companies. They’re often purchased with payment bonds. You’ll need to obtain both at some point. When doing so, you should pick up the phone and call Stokes Surety Bonds.
HOW DOES IT WORK?
Performance bonds may seem complicated but they’re straightforward once you get the hang of them. As the owner of a Texas construction company, you have to understand how these bonds work. Otherwise, you may purchase the bond, fail to live up to your end of the bargain, and regret your decision. So, you need to find out as much as you can about performance bonds before crossing the starting line.
First and foremost, you should know that performance bonds are acquired by your company. Once your bid has been accepted, you will need to obtain a performance bond. You cannot work on the project until you’ve obtained a valid performance bond.
Once you’ve done that, you can start working on the project and getting things done for your clients. Just remember that the performance bond is going to hang over your head from the start. It means that you have to get things done.
If you fail to complete the work as promised, the client will be able to file a claim against your performance bond. This means that you’re always entitled to get things done correctly. You’ll want to do the best for your clients anyway so this shouldn’t be a problem.
However, there is always a risk that a claim is going to be filed without just cause. If this happens, you may be able to win the claim and avoid paying. Either way, it is best to avoid complaints. To do that, you should keep your client informed, work hard, and get the project completed on time.
WHY ARE PERFORMANCE BONDS NEEDED IN CONSTRUCTION?
In Texas and beyond, the construction industry is unpredictable. It can be difficult to know whether you’re working with a qualified contractor. Furthermore, you have to be worried that something is going to go awry. A supplier may provide incorrect materials that prevent the project from being completed on time. If this happens, your client is going to be upset and you’ll need to remedy that problem immediately.
Performance bonds are essential due to the unpredictable nature of the construction industry. Performance bonds protect clients. The bond ensures that the client has a way to seek compensation if something goes wrong.
Furthermore, it encourages Texas construction companies to work hard for their clients. Even if you don’t need more motivation, you need performance bonds. You won’t be able to help your clients without them. So, you should take the time to learn as much as you can about construction bonds. Do that and you’ll be ready to become a driving force among Texas construction companies.
OBTAINING PERFORMANCE BONDS
Construction companies in Texas and elsewhere need performance bonds. Without them, you won’t be able to obtain contracts and make money. However, you’ll need to jump through another hurdle before you can obtain performance bonds for your construction company.
Working with Stokes Surety Bonds is one of the best ways to get the bonds you need in a hurry. Just remember that the cost of performance bonds will depend on numerous factors including the performance bond amount. Some contractors will pay as little as $2,500 for a performance bond for a $100,000 project but the prices may vary.
When applying for a performance bond, the surety company will request more information about your company, personal credit score, and more. They’ll want to better understand the risk of giving your company a surety bond. If they feel that your company is a higher risk, they’ll charge you more and vice versa. However, it is important to note that things can be very different for contractors with no previous surety bonding history.
For the best results, you should maintain a low credit score and fulfill your obligations. When you’re ready to get bonded, you should contact Stokes Surety Bonds.
NEED A CONSTRUCTION SURETY BOND FOR A JOB? COUNT ON STOKES SURETY BONDS