Performance Bond
What is a Performance Bond?
Performance bonds—also known as contract bonds—are a financial tool to help ensure large projects are completed successfully. Common in the construction and real estate development industries, owners or investors often require developers to assure that contractors procure performance bonds to protect the value of the work provided in the case of an unforeseen negative event. Essentially, a performance bond is issued by one party to contract a second party as a guarantee against the issuing party’s failure to meet contractual obligations. It’s important to note, a performance bond is not insurance. If there is a claim against the bond, TMD will pay the amount of the bond to the obligee and seek recompense from the principal or contractor.
Performance Bond Process
The contractor bond process entails the following steps:
- The project manager determines whether the project specifications require you to be bonded.
- If so, you must contact your surety bond company to obtain a bid bond.
- Once a bid bond is obtained, you will submit your precise project bid proposal.
- If your bid is selected, you must contact your surety bond company to obtain a performance bond. Many surety bond companies will package performance and payment bonds together; if so, request a payment bond as well.
- Once you have completed the project under the terms of the contract, you should contact your surety bond company as the bond will likely no longer be necessary.
Selecting a Bond Company
Projects $750,000 and below are three percent of the contract amount. The contractor bond process is the best way to protect both yourself and your clients. When choosing a contractor bond company, look for a provider that sells to industry-leading companies, offers competitive premium rates, and provides a fast turnaround with excellent customer service.
Getting Started
Bond Purchase Process
1. Find Your Bond
2. Secure Pricing
3. Buy Online
Get Started
The bonding process can be confusing and cumbersome. Our surety bond experts are standing by and ready to answer any questions. Let’s get you bonded today!
Frequently Asked Questions
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The bonding process can be confusing and cumbersome. Our surety bond experts are standing by and ready to answer any questions. Let’s get you bonded today!