PERFORMANCE BOND
A Performance Bond is issued by the Surety at the request of the contractor, or "principal". A Performance Bond contract is entered into when signing a new job contract with an owner or general contractor, or "obligee".
The Performance Bond guarantees to the obligee that the job will be completed according to the terms of the contract. The bond provides security to the obligee that, should the principal fail to perform the contract, the surety will either; complete the contract, pay for the cost of completion in excess of the contract price, or pay the bond penalty.
Requirements for a bonding facility:
Similar to traditional lenders, Sureties look to the 3C’s of Credit to determine whether or not a contractor qualifies for a bonding facility.
- Character: Does the contractor have a good track record, good references and integrity?
- Capacity: Does the contractor have sufficient cash flow to service the job and to weather potential delays in payment? Is a line of credit in place, in case of emergency?
- Capital: Does the contractor have a strong net worth position? Generally, the minimum equity requirement is $150,000
Do not Qualify?
I)The community based contractor with expertise & experience may not qualify for a community construction project due to limited financial resources.
We have a solution whereby the Surety partners up to qualify the contractor. The contractor manages the project and the Surety manages project financial costs:
-cash flow
-payment of sub-trades
-payment of materials
-provide monthly lender project reports
Require only a single bond, not a bonding program?
II) GUARANTEED APPROVAL for jobs where the bond amount is $125,000 or less, with a Municipal Works bond.
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