Surety Bonds: Cost Questions

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How much does a surety bond cost?

A surety bond can be acquired through an insurance company and also through your state’s department of insurance. However, the costs for this type of bond will depend on which option you choose as well as other factors such as: 

  • The principal is the one who needs the bond. 
  • The line amount. 
  • The length of time the bond is needed for. 

A higher level bondsman or bonding agency might charge more than a lower one, however, they may have better knowledge and experience in these matters. The following are some rough estimates from various brokers that deal with business entities involved in construction projects. As you’ll notice below, a commercial builder is usually required to provide a financial statement. The following are guidelines, not quotes.

Independent surety brokers might charge anywhere from $100 to $500 per million dollars of bond required, depending on the work being carried out by the principal. For instance, a larger company or corporation is likely to have their premiums more expensive than someone with less financial responsibility involved in, say, manufacturing.

So I don’t pay for the full bond amount?

The majority of defendants charged with criminal offenses are able to post bond, which is the process of handing over a sum of money in order to be released from jail prior to their case being resolved. Although this may seem like an easy way out, it will typically cost you much more than what you spend on your monthly cell phone bill. 

As the old adage goes, “You get what you pay for”, and in most cases, it’s very true when talking about posting bond. Defendants who lack the financial resources to post full bail amounts end up staying behind bars until their court date to avoid having “bail set” at an astronomical amount they cannot afford. 

To make matters worse, individuals who fall into this category will still have to pay for their stay (and any other fees and interest that are added to the total amount of money they owe). Defendants who do not have the financial resources to post full bail amounts can benefit from working with a licensed, reputable bond agency.

Can I get a surety bond with bad credit?

There are two ways your credit history could affect you when applying for a surety bond. First, if your company is just starting out and has no track record of success, lenders will be more likely to offer you rates that reflect greater risk. Second, even if your company is well established, the lender may require increased down payment or collateral in exchange for lowering the rate on your surety bond i.e., high risk = higher cost.

When it comes to purchasing a surety bond, we’ve found there isn’t much variation in what bad credit means from one lender to another; generally speaking, it’s any bankruptcy or foreclosure showing on an applicant’s credit report. 

However, most surety bond companies are more concerned with your business’ credit rather than your own. So while you may not be denied a surety bond because of your credit history, you could find yourself paying higher rates or having to put down a deposit not ideal if you are already in the hole financially.

What if I can’t pay for my bond?

Bonds are a legally binding contract that requires the defendant to pay as promised or appear at scheduled court appearances. If you don’t pay as you promised, then you can be found in “contempt of court.” Contempt is basically violating the law and it means you don’t follow the judge’s order (the bond) and may go to jail until your case is over.

First, we should tell you that we can’t give legal advice here. If we answered this question for you we would have to answer the same question for everyone else who reads this blog. You’ll need to talk with a lawyer about what might happen to you if you don’t make your payments.

That said, the person who holds your bond (the bail agent) can take you to court if they believe you violated the terms of your contract with them. The bail agent isn’t an attorney and won’t represent you in court; instead, they will ask a real lawyer called the prosecutor or district attorney to sue you for breaching your contract. 

They may also use another business that specializes in collections called a “recovery” company. If this happens to you, then it gets very complicated. We can’t tell exactly what would happen because everyone’s situation is different and we all know…you should talk to a lawyer about this!

Is my credit history checked when getting a surety bond?

There are two surety bonds where credit history will not come into play. They are the Sub-Divisional Agreement Surety Bond and the Utility Payment Bond/Surety Bond. 

These are not standard applications for a bond, but they do address specific needs to individuals or businesses attempting to open an office within a sub-division or utility company respectively. It should be noted that these are exceptions only – credit history is taken into consideration on all other types of surety bonds.

To know more about surety bonds, check us out now!

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