Understanding Information About Contracor Bonds

If you have just started working as an independent contractor in the construction industry, then you may know that there are certain things that you need to do to make sure that your business runs smoothly. One of the things you should look into is contractor bonds. This process may be confusing, so keep reading to learn the answers to a few basic questions you may be asking yourself. 

Do You Need A Contractor Bond?

You may not actually require a contractor bond depending on the type of industry that you conduct business in and the types of jobs you take. For example, if you conduct business on a Native American reservation or if you want to complete a project in a private residence, then you do not need to be bonded. This is also the case if you are working on lengthy projects that are over three years in length. 

If you do any work overseas you will not need a bond either, because the bond is something that is required by the state and federal governments within the United States.

If you figure out that you do not need a bond to complete your projects, then you will still need business insurance, so contact your insurance company about this. Many insurance companies can assist with bonds as well, so this is a good place to start if you need assistance.

What Is The Bond Line?

The bond line is that amount of money that will be used to back your venture in the case that you do not follow through with the contracted project. The line amount can vary greatly depending on the how long your business has been in operation and your credit score. In some cases, the business credit score and your own will be taken into consideration, especially if you have an owner operated business. 

The finances will be taken into consideration too, and so will your experience. You can expect a smaller bond line if you are a new business or if you do not have stellar credit. While this is true, you can still expect to be covered by at least around $300,000. Once your credit improves and your financial statements reflect completed projects, then the bond line can increase to $500,000 or more. This means that you can take on larger projects in time, line ones for Fortune 500 companies that often require contractors to obtain contract bonds, regardless if state regulations state this as well or not. 

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