Have you ever asked the question, how do you get bonded? Well you are not the only one. Being bonded is a necessity, whether you are a small business, an independent contractor or you are someone who is seeking employment that needs trust and financial integrity. The benefit of being bonded in the American marketplace is that it gives a touch of authenticity to the business, leaves customers with a greater level of confidence and in most cases, being bonded is legally obligatory to enter into business in some industries.
However, being bonded is not as inexplicable and within a snowflake as many thought. Through this blog, I will take you through all the thing you need to know about this bonding including what it means, how it happens, the types of bonding and why it is important to any professional business operating in the U.S.
Learning the Fundamentals: What is Meant by Bonded?
It is worth learning the definition of what it means to be bonded before getting into the step by step process of how do you get bonded. In most cases, when one is bonded, it means they have taken a surety bond-a three party contract between:
- The person or business who buys a bond (the principal),
- The obligee (the party obligating one to pay a bond), and
- The surety (the company which issues the bond).
A surety bond is basically a financial security of ethical and lawful performance of the principal, and that the obligee is to be compensated in case there is negligence, fraud or default of contract.
Bonding is required on many professions and services. An example of this could be contractors, janitorial service providers, auto dealer service or even notaries who usually are required to have a bond to be able to do business or keep the trust of the consumer.
Step-by-Step Process Bonded How Do You Get
Step 1: Identify the Kind of Bond You require
The initial thing in responding to how do you get bonded is determining what type of a bond you need in order to work or trade in your profession. They are of three main types:
- License and Permit Bonds– They are normally required by local, state or federal government and professionals such as electricians, plumbers and real estate brokers.
- Contract Bonds – They are issued within the construction sector in order to make sure that a contractor will provide a project according to the dynamics.
- Fidelity Bonds: This covers business in case of theft by employees and usually offered as optional yet highly recommended to companies that deal with sensitive information or assets.
Step 2: Select a Trusted Provider of Surety Bond
Now that you are aware of the kind of bond you require, next is to decide who your surety bond company should be. This may be any specialized bonding agency or a bigger insurance company which provides bonding services. Seek licensed providers operating in your state and with the good record with regards to service.
Step 3: Fillout the Application
The procedure of getting the bond also differs with the kind and the amount of the bond. You normally will need to furnish:
- Entrepreneur information (employer identification number, address, license)
- Monetary data (Credit score, Tax materials)
- History of previous (criminal record or prior bond claims)
Here this is greatly important and good credit history. Jessica Hartman, a senior underwriter at SuretyWorks Inc., says, “It takes very little time and at cheaper cost to approve applications with sound credit and no prior claims.”
Step 4: Pass Background and Credit Check
Bond providers that are dealing with surety bonds will assess your history and credit worthiness in order to understand the risk involved in issuing a bond. The credit score as well as financial capability will influence the premium you have to pay on the bond, with better credit score and finances; the premium will be lesser.
What happens when your credit is weak? Nothing that good credit would buy at a reasonable cost. You can still be bonded but it will be more expensive and may need more collateral or a co-signer.
Step 5: Making payment of the Premium and obtain your Bond
Bond premiums are normally between 1% and 15 percent of the face value of the bond depending on the risk that has to be estimated. After paying your premium, you will be issued with your bond certificate that is official and thus can be handed over to the appropriate licensing authority or employer.
What is the Importance of Bonding in the Current Economy?
The bond is more than a legal necessity, a bond will reinforce your professional image. It demonstrates to clients, employers and the authorities that you are financially responsible and are taking commitment to ethical business affairs.
In such industry as construction or transportation, being unbonded may lead to missing the contracts or being prevented to bid at all.
In addition, a number of consumers in the U.S. go out of their way to seek bonded service providers. Licensed, bonded and insured is one of the selling point phrases that are normally used because it portrays accountability.
Obstacles and Myths on Bonding
One of such myths is that bonding is costly and can only be obtained by the big companies. Actually, most bonds can be secured at a price of less than one hundred dollars on yearly basis on small operations. Besides, individuals tend to misunderstand the meaning of being bonded and insured. Although they both protect, they do so with a variety of purposes. An insurance offers protection to yourself and a bond offers protection to the client.
The other myth is that you are immediately rejected on account of financial problems in the past. Credit history plays a part, but numerous surety companies are in the business of high-risk bonding, and will accept much more flexible terms.
Various Bonds to Various Professions
Suppose we look at the kind of bonds that such common professions may require:
- Contractors and Builders: Payment bonds, bid bonds and performance bonds.
- Auto Dealers: Bond required by most states on motor vehicle dealers.
- Cleaning Services: Employee theft/Fidelity bonds.
- Freight Brokers: Freight Brokers who are required to undergo the BMC-84 bonds regulated by the Federal Motor Carrier Safety Administration (FMCSA).
- Notaries: Bonds to assure official action of a notary is legal.
All such bonds have specific obligations, amounts of coverage and state requirements. As such, it is essential to conduct research to carry out industry-specific research.
What Is the Process Like of Getting Bonded?
Majority of the simple bonds (such as license or permit bonds) may be authorized within a day. Less complex ones are as simple as an hour, or several days or a couple of weeks in larger projects that involve contract or performance bonds.
The process of bonding should be started in advance of all deadlines so that approvals could be made smoothly.
Rebirth and Constant Duty
Bonds are usually issued on an annual basis and have to be renewed after a year. Keep expiration dates in mind and keep financial records clean. A bond claim will not only be a cost affecting you but it will also affect your credibility as well as chances of bonding in future.
But renewals tend to be easier compared to the first one and this is barring any claims being made and your financial remaining steady.
What Can You Do To Be Bound When You Are Self-Employed?
In case of freelancers and solo entrepreneurs, the procedure is not that different, but just easier. Fidelity bonds can provide reassurances to clients when you are working as an independent consultant, in technology, or cleaning services, etc. where they entrust you with sensitive information or their property.
In addition, self-bonding may make a difference in a competitive world. It Professorism is an indication that whether a large corporation is behind you or not; you are at the executive table.
Conclusion: It is wise to be Bonded
Now the question is, how do you go about being bonded? This is simple, you identify the type of bond you require, apply via a licensed provider, credit and back ground check, pay your monthly premium and you have your bond certificate.
Your being bonded makes a difference as you are running a small or new business, working as an independent contractor, assuming a position that involves trust and financial responsibility, etc.
This is a necessary step to take in terms of affordable premiums, fast approval rates, and the extensiveness in its application. Today, as more than ever trust is everything in the economy, bonded is not a simple box to check anymore, it is a seal of credibility.
