Performance Bonds

Performance bonds guarantee the performance of a contract by the contractor.  The signed contract is incorporated by reference into the bond, and includes the guarantee that the contractor will complete the contract for the agreed-upon price in the specified amount of time.  In the event of default of contract by the contractor, the surety is required to step in and fulfill the requirements of the contract.  They can do this by either funding the bonded contractor to complete the project, hire a new contractor, or pay the project owner the necessary funds to complete the project.

Rates for performance bond vary, depending on the type of work being performed and the financial qualifications of the contractor.  Most sureties have a multi-level, tiered rating system.

To apply for a contract bond line, surety companies require the following:

  • Completed contractors questionnaire
  • Last 2 or 3 years’ business financial statements, preferably prepared by CPA
  • Personal financial statements of each owner of the business
  • Bank letter of reference, to include information on lines of credit
  • Current work on hand report

At Associated Bonding, we also have several programs available for the contractor that has minimal bond needs and consequently have minimal underwriting requirements.  Check out our Programs section of our website for additional information.
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