Step by Step

    Surety bonds are legal agreements between three parties: the principal, the obligee, and the surety. The principal is the party who purchases the bond to guarantee they will fulfill an obligation or commitment. The obligee is the party who is protected by the bond, typically a government agency or contractor. The surety is the party who guarantees the principal's performance and will pay damages if the principal fails to meet their obligations.


    To complete a surety bond, you'll need to gather and submit several documents. Here are the steps you'll need to take, along with the documents you'll need to provide:


    Step 1: Determine the type of bond you need

    Different types of surety bonds require different documentation. Common types of bonds include:


    • Contract bonds: These are typically required for construction projects and guarantee that the contractor will fulfill the terms of the contract.
    • Commercial bonds: These can include license and permit bonds, customs bonds, and more.
    • Court bonds: These are required in legal cases and guarantee payment of judgments or court costs.


    Each type of bond will have its own requirements for documentation.


    Step 2: Contact a surety bond company


    To obtain a surety bond, you'll need to work with a surety bond company. They will help you determine the specific documentation you need and guide you through the application process.


    Step 3: Gather the required documents


    Depending on the type of bond you need, you may need to provide some or all of the following documents:


    • Application: This is a standard form that provides basic information about the principal and the nature of the obligation being guaranteed.
    • Financial statements: Surety bond companies typically require financial statements to assess the financial stability of the principal.
    • Personal financial statement: This provides information about the personal finances of the principal, including assets, liabilities, and income.
    • Business plan: If the bond is for a new business or startup, you may need to provide a business plan to demonstrate your ability to fulfill the obligation being guaranteed.
    • Resumes: The surety bond company may ask for resumes of key personnel, especially if the bond is for a construction project.
    • Contractor's license: If the bond is for a construction project, you may need to provide a contractor's license or other documentation that demonstrates your ability to complete the project.
    • Indemnity agreement: This is an agreement between the principal and the surety that outlines the responsibilities of each party.
    • Collateral: Depending on the amount of the bond and the financial stability of the principal, the surety bond company may require collateral to secure the bond.


    Step 4: Submit the documents and complete the application process


    Once you've gathered all of the required documents, you'll need to submit them to the surety bond company. The company will review the documents and may request additional information if necessary. Once the application process is complete and the bond is approved, you'll need to sign the indemnity agreement and pay any required fees.


    Step 5: Maintain the bond


    Once the bond is in place, you'll need to make sure you fulfill the obligations guaranteed by the bond. If you fail to do so, the obligee may make a claim against the bond, and the surety will be responsible for paying damages up to the amount of the bond. You'll also need to maintain any collateral provided to secure the bond.