How Long Does It Take To Get Surety Bonds? – Examining The Typical Procedure

Lets Begin with the Basics!

There are hundreds of Canadians, who are entirely unfamiliar with surety bonds. Although some of these people will never encounter a need for a bond, some will and they’ll need to quickly learn about surety bonds, before they’ll be able to do so. Initially, the procedure might seem complex and incredibly confusing. Although there are some complexities involved, obtaining a surety bond is typically straightforward and fairly quick. Below, you will learn about the general procedure of acquiring construction security bonds, so you can figure out precisely how long it’ll take to obtain the needed bond.

Undeterminable Timing

Many individuals and business owners are under the impression that a surety bond can be issued within days of the initial application. This is a huge misunderstanding that can lead to disappointment for those that are waiting around for a response from the surety company. The pre-qualification process is actually quite lengthy, making the timing undeterminable.

The surety works diligently to complete a full analysis of the applicant. This process is a necessity, since it is the only way to ensure the surety that the applicant will be able to meet the contractual agreement terms. The surety company is always at a huge monetary risk and by processing the surety bond application accordingly these risks can be reduced drastically.

The General Procedure

It should be known that the process of obtaining a surety bond would generally depend on the type of bond that is needed. The amount of risk associated with the construction bond may play a major factor in the difficulty of the process. For lower risk bonds, it will actually be possible to apply for and acquire the bond online. Once you’ve found a suitable surety company, you’ll find a quote form on their website. After this form has been completed and submitted, you’ll receive a quote within a short period of time. Keeping this in mind, you must meet the bond requirements and personal credit scores that make you eligable to receive the bond without any further underwriting.

If you find that the quoted price is reasonable and will easily fit into your budget, you’ll be able to go ahead and pay the initial upfront cost. From there, you’ll be able to sign the bond contract and the surety will begin working to process the bond and will eventually mail it to your physical address. Some may also give you the ability to print the bond directly from your computer. Just remember that some bonds will impose a stricter qualification process, so the duration may drag out a bit longer.

Overall

It is vital to know that there is truly no universal time frame for acquiring a construction bond. The procedure and length of the process will deviate from Canadian Surety Bond company to the next and may depend on the risks involved. Just remember that it is best to bide your time and shop around, so you can acquire a lower cost.

Qualifying for a Surety Bond in Canada

How To Prequalify For A Surety Bond

Prequalifying for a surety bond can be a difficult process, especially if you have never done it before. Surety bonds are necessity for development contractors, who bid on public projects. All provinces and territories require government contractors to post a surety bond. This three-party agreement is designed to protect the public from harm caused by fraudulent behavior, exhibited by a contract company. Below, you will discover more information about prequalifying for a surety bond.

construction surety bonding

Surety Bond Purpose

While, the surety bond was designed to protect all consumers from harm, they also help to weed out the unqualified contractor. This ensures the government that contractors are going to comply with the regulations pertaining to the construction industry. If you are considering starting a construction company, but do not plan to bid on public projects you still may want to get the bonding process started as you may need to bonds in the future. Many project owners will not even consider hiring an non-bonded contractor, so if you want to survive in the contracting industry, it will be in your best interest to post a surety bond.

Prequalification Process

Surety companies have a big responsibility, when it comes to ensuring the government that they are following the underwriting protocols. The purpose of the prequalification process is to make sure that the applicant is qualified to fulfill the terms of a construction project. You must be prepared to undergo a rigorous prequalification audit, including a review of your business, credit history, previous work history, and financial assets. You will need to prove to the surety company that you are capable of funding the project and completing it, by the deadline agreed upon in the contract.

Business Reputation

Your business reputation will play a huge role in determining, whether or not you qualify for a surety bond. If this is your first construction project, you may lack the experience and workload history that is required, but this does not mean that you will be denied a surety bond. In fact, there are other ways to prove to the surety that you will not default on the contract. You will need to strengthen your application, by providing the surety with a financial statement of your liquid assets and net worth. You can also post collateral on your bond, if necessary.

While, it is not necessary, you could have someone cosign on your bond. Of course, it will be very difficult to encourage someone to become a cosigner, but if you have someone that is willing to take the risks, then by all means do it.

Rates

Surety bonds require a one-time payment or premium, which is based on your credit scores and the contract amount. These costs may vary from one surety company to another, so if you are smart, you will do a bit of comparison shopping, before signing on the dotted line. The premium must be paid at the time of the validation, so make sure that you have this amount in your bank account prior to initiating the application process.

Conclusion

If you get turned down by one Surety Company, there still may be some hope to get bonded. Work on strengthening your application, before moving forward, because this will play a huge role in the determining factor.