How to Get a Surety Bond as a New Business

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How do I get a surety bond for my company?

Getting a surety bond is not that difficult and it can usually be done in just a few hours. The first step you should take is to contact your state’s Secretary of State office to find out if they require a surety bond for your industry. This could save you time and money since many states offer the option of obtaining an individual license or licensing by exception, which does not require a surety bond. 

Or, if you want you can open up an escrow account with your local bank and ask them if they will act as an issuing agent for surety bonds. Some banks do this when the deposit amount meets their criteria. Be aware though that even if you don’t need one (or the bank refuses), the bonding companies will still want to have a credit check on you, so be sure that your accounts are in good standing with local banks.

After you decide what type of bond is required for your company, the next step is to contact an insurance agent who specializes in business bonds. He will take down some information about you and your company, ask about the size of the bond required, go over your financial statements (or bank statements), and then look at your industry to determine which bonding company would be best for you. 

There are several factors that affect this decision; these include how long it has been since they had an insurable interest claim filed against them (insurable/financial stability) and who holds their surety licenses (in case anything happens).

What is a bond when starting a business?

A surety bond is a contractual agreement, your business enters into with the surety company that backs it up. With this agreement, you agree to comply with all state and federal laws pertaining to the transacting of business. The money for any claims filed against you is obtained through the premiums paid by your company. 

If no claims are ever made against your business there will be no out-of-pocket expense for your company; however, if they are, the government (or other entity) filing suit will receive compensation from the bondsmen’s insurance pool or their own policy depending on what agreements were made between them and their insurer at the time of purchasing coverage.

Can I get a surety bond online?

Sure, you can get a bond online. The first step is to contact an insurance agent that specializes in business bonds. He will take down some information about your company and then look at your industry to determine which bonding company would be best for you. After this, he will work with the underwriters of the bonding company that was chosen to write up your agreement (which is basically like an insurance policy) and submit it for approval (where they make sure all of the terms of coverage are acceptable). 

Once this has been completed successfully he will either call or email you letting you know what forms need to be signed on their end, as well as any other required documents before finalizing the transaction. He will also let you know when payment must be made and he will provide you with a final invoice for your records. 

Once everything has been taken care of on the company side, the agent takes the information back to the bonding company and they issue a certificate of insurance to both you and your agent. This is proof that you have completed all requirements necessary in order to receive service from this bond company.

Why does a business need to be bonded?

A business needs to be bonded because it provides the sureties (the insurance companies that underwrite these contracts) with an insurable interest in making sure that customer funds are protected. This is why they need your financial statements, your company’s credit history, and any other records pertaining to how you conduct business.

Why do I need a license for my new business?

This depends on where exactly you intend to transact business. If you work out of your home state, chances are there will not be any licensing required; however this does not mean that your state won’t require registration or notification of start-up activities related to your new endeavor. 

If you plan on doing any interstate transactions they may also make the licensing application mandatory in order for you to do business with other companies. The best thing you can do is contact your state licensing agency or the SBA for more information on what may be required of you, depending on where your company is located.

Can my new corporation get a license without me?

Yes, it can, however, this will vary by state, and again the SBA should be able to provide you with more specific information about these particular requirements. Generally speaking though, if they have all proper documentation in order then they may allow them to transact business while they are still trying to track down the owner/s of the company.

To know more about Surety Bonds, visit Alpha Surety Bonds now!

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