Business Service Bond

Business Service Bond

A surety bond is a contractual agreement between three parties.  The oblige (usually the owner of the project, government agency or anyone who work is being done for) is who the surety bond is meant to protect against any wrongdoing by the principal (the company, business or individual which purchases the bond as a written assurance that the terms in the surety bond will be adhered to).  The final party of the contract is the surety (a company that issues bonds between the oblige and principal).

Part of the application process may be to examine the financial security of the applicant.  The surety bond producer may ask for financial statements, both personal and professional, bank statements, etc.  Some surety bonds are considered higher risk than others, and will require more paperwork.  For companies with a bad credit history, who require more work to assess financial stability and risk involved before issuing the bond, the bond rates will be higher.

If a claim is filed against the principal, the surety bond producer will evaluate the claim and decide if any wrongdoing was done, per the terms of the surety bond.  If the obligations are not met, the surety company will pay the claim and then seek reimbursement from the principal. Thankfully, a surety bond producer is there to protect the principal as well.  By listening to both sides, they help to determine if any wrongdoing was actually done.  This helps to protect against any false claims being filed.