A surety bond is a financial contract between three parties: the obligee (the buyer), the principal (the client), and the surety (the financial backer). This bond guarantees that the surety will reimburse the principal if the obligee fails to complete agreed-upon work. Often, construction projects will require selected contractors to be bonded before starting work.
There are multiple types of surety bonds that, depending on your trade, may apply to operating your construction business.
- Some projects will require a contractual agreement that your company purchases a contractor bond before starting work.
- Depending on your state, some trades need a licensing or permit bond before taking on projects.
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