A surety bond is a three-party agreement that guarantees the performance of a contractor. It protects the project owner from financial loss if the contractor fails to meet their obligations.

To apply, you need to provide financial information and details about the project you are undertaking.

The process for applying for a surety bond typically follows these steps:

1. Determine the Type & Amount of Bond Needed

• Identify the specific bond required (e.g., contractor license bond, performance bond, auto dealer bond, etc.).
• Verify the bond amount required by the state, municipality, or client.

2. Complete the Bond Application

• Provide business and personal information, including:
  • Legal business name and structure
  • Employer Identification Number (EIN)
  • Personal details of business owners
  • Industry experience

3. Underwriting & Credit Check

• The surety company assesses risk based on:

• Financial History (assets, liabilities, and cash flow)
• Business Experience (for contract bonds)
• Credit Score (a higher score = lower rates)

• Applicants with good credit (700+ FICO) usually get instant approvals, while those with poor credit may need additional financial backing.

4. Pay the Premium

• When approved, pay the bond premium, typically 1% – 10% of the bond amount, depending on risk factors.

5. Receive & File the Bond

• The surety company issues the bond certificate.
• Submit the bond to the required authority (e.g., state licensing board, client, or court).

6. Renewal (If Required)

• Some bonds need annual renewal, and rates may change based on financial health and claims history.

The cost of a surety bond depends on several factors, including the bond type, amount, applicant’s credit score, and financial history. Here are the general industry standards:

1. Standard Surety Bond Costs (Premium Rates)

• 1% – 3% of the bond amount for applicants with good credit (700+ FICO)
• 3% – 10% of the bond amount for applicants with fair to poor credit (below 700 FICO)
• 10%+ of the bond amount for high-risk applicants (bad credit, bankruptcies, or past bond claims)

2. Cost Breakdown by Bond Type

• Contractor License Bonds: $100 – $1,000+ annually (depends on state & bond size)
• Performance & Payment Bonds: Typically 1% – 3% of contract value for qualified applicants
• Auto Dealer Bonds: $500 – $10,000 per year (varies by state & bond size)
• Fidelity Bonds: 0.5% – 2% of bond amount (protects against employee dishonesty)
• Court Bonds (e.g., Probate, Appeal Bonds): 1% – 5%+ of bond amount

3. Key Cost Factors

• Bond Amount: Higher bond requirements mean higher costs
• Credit Score: Higher credit = lower premium
• Financial Strength: Business and personal financial statements may be required
• Industry & Risk: High-risk industries (construction, auto dealers) may have higher rates