If you’re a business owner hunting for a good surety company to handle your bond, you’re faced with a dynamic and heavily populated marketplace. The Treasury Department alone lists hundreds of approved and certified companies. Here’s how to find clarity and navigate through the noise.
One of the primary reasons businesses choose surety bonds is so that they can act immediately on opportunities that will inspire further revenue. A surety with a sluggish turnaround time is a revenue leak that few can afford. You need to know in advance what your carrier’s response time is. If you’re dealing with a large provider with branches across the country, don’t assume all of them offer the same turnaround time. Check their list of available bonds and determine which ones offer a turnkey service.
2. Credit Rating
A stable surety company is a necessity because most bonding businesses don’t refund within the first year. This leaves you out of pocket with nothing of value to show for it. A.M. Best offers reliable credit ratings to guide you in this area.
3. The Treasury Department 570
This Treasury Department Circular tells you whether your bonding company is accredited and meets all government requirements. Authorized sureties carry a Certificate of Authority on Federal bonds, each of which is carefully reviewed every July.
4. Standard and Poor
Standard & Poor and Moody’s rate both institutions and sureties. These listings tell you how financially healthy your surety is, and generally apply to insurers and banks. Here, commission is charged on the total bond, with a penal sum that reflects the highest amount the surety will pay if your business defaults.
5. File Update Procedures
Bonding companies don’t simply sign surety without keeping up with the businesses they’re assisting. You should find out how many file updates they require each year and what kind of data they want from you.
The most unfortunate aspect of sureties is the fact that you pay more if you’re a high-risk lender. Contract surety bonds are relatively uniform in price, but small variations can add up if you need a large bond. Rates vary enormously for smaller bonds, so shop around.
7. Surety Brokers
Surety brokers can help you to find the right company for your needs. If surety bonds are a core part of your business dealings, you need a broker who can support you well and is willing to get to know your needs in-depth. Before you choose someone to represent you, make sure they have relevant knowledge of the marketplace and, preferably, working experience as an underwriter. The National Association of Surety Bond Producers can be used to check on the quality of your broker’s work and education.
8. Eliminate the Middleman
If you’re working through a middleman, you’re paying more. Choosing to go direct will cut your rates and simultaneously put you in touch with the key decision makers involved in your case.
In the world of bonds, reputation is everything. A representative who has spent many years or even decades establishing their standing is that much more likely to act accountably and with squeaky-clean ethics.