This is a guest post by Matt Bruns. Beforehand I didn’t know much about surety bonds. Thanks for educating me too Matt!
If you’re starting your own business, you probably already have a to do list that’s several miles long. From getting your business licenses and permits to establishing your company’s structure, the process can often be difficult and stressful at best. However, beginning your own company can have huge rewards, not the least of which are financial.
Successful business owners can expect to reap substantial gains from their companies and between the business’s equity and earnings, owning your own business can often be the surest path to financial success and prosperity.
Ensuring that your company has all the applicable surety bonds in place before you begin any type of business-related activity is a critical step to being rewarded with top earnings. The process is a fairly simple one. Surety bonds are required by law for a variety of businesses and are in place as an assurance that you will abide by federal, state, and local laws and regulations concerning your industry.
What’s more, bonding is a reasonably easy and inexpensive process, with most bonds costing just a few hundred dollars. But keep in mind each state sets their own surety bond rules. For example, a surety bond in Illinois that is required may not be required in another state, or may have a different bond amount. If you’re unsure about the type and amount of bond that you need to purchase, contact your state’s small business administration or bonding agent of choice and inquire about the bonding requirements for your industry.
One crucial step to purchasing a surety bond is finding a company from whom to buy your bond. Surety bond companies are numerous, particularly online, and it’s important to find someone who is accustomed to selling bonds to companies in your industry, since the challenges associated with running a business are often unique from industry to industry. Your new bonding agent should be knowledgeable about the challenges you’re facing and should also be able to offer a fresh perspective as well as a support system for you in the early days of your company. Look for someone who makes you feel comfortable and seems to take a genuine interest in your company and your success. The more allies you have on your side, after all, the more likely your business will thrive.
It’s also imperative that your new bonding company have a stellar reputation. After all, you’re trusting them with your finances and, essentially, your reputation should there be a claim on your bond. The bond company should be secure, established, and trustworthy above all else. It’s a good idea to ask other companies in your industry about their chosen bonding company, and to also check with the Better Business Bureau to make sure whichever company you choose has a clean history.
Keep in mind that you’ll be providing detailed financial information to the bonding company so that it can make a determination of your credit standing and financial strength. Surety bond prices rely heavily on the bonded company’s credit score and financial statements, so it’s critical that you provide accurate and up to date information. Since surety bonds are a form of credit (not insurance), the bonding company needs to make sure that you’ll be able to cover the full value of the bond should it come due because of a claim. If your business has poor or little credit history, you can expect to pay more for your bond and may have to use a bonding company who specializes in subpar credit bonds, which can be both a hassle and an expensive proposition. Therefore, it’s important that you clean up your credit as much as possible before seeking out a surety bond.
After you’ve purchased a bond, make sure to advertise the fact that you do maintain legally-required bonds to your customers. As they become more and more savvy, consumers are looking for companies who are licensed and bonded and often, this fact will win you more business over your counterparts who may not advertise their bonding status.
Keep in mind that surety bonds are not only a legally-required part of many industries but can also be a good selling and conversational point for your company. Maintaining a bond is an inexpensive way to ensure that your business is complying with state, federal, and local laws and will therefore protect the time and money that you’ve invested to make your business functional, reliable, and above all, profitable.
This is a guest post from Matt Bruns of SuretyBonds.com, as part of their Surety Bond Education Program.