When starting up a small business for the first time, purchasing a surety bond to meet licensing regulations might at first seem like a hassle. However, there are a number of lessons the bonding process can teach you about operating a successful small business.
1. You work in an industry that values higher standards
When an obligee requires a surety bond, the entity is basically saying that they value – and subsequently expect – a certain level of performance from its professionals. Obligees are typically government agencies who use bonds to help regulate an industry and protect its consumers. Based on the bond’s language, the obligee outlines what kind of performance is desired for an industry or profession. Likewise the obligee defines the sort of behavior that is inappropriate. When boundaries include high expectations, you and your business will have the opportunity to perform at a higher level. For example, contractors working on a construction project are often required to secure a performance bond to guarantee the quality of work they will do in the future.
2. You’re accountable for your decisions and actions
Surety bonds hold professionals and business owners to their word by requiring them to meet to specific terms. This helps to ensure that you’ll complete your professional duties reliably and consistently. Surety bonds help promote ethics in the workplace by holding principals legally and financially accountable for unethical decisions and actions. If you break a contract, commit fraud, or take advantage of your consumers in other ways, your surety bond will require you to resolve the situation or else pay the necessary reparation.
3. Your financial history – and future – matters
Before you can purchase a surety bond, the surety provider you’re working with will conduct a thorough background check of your financial history, work record, and credit score to determine if you are reliable enough to work with. If the surety’s underwriters approve you for a bond, then the surety will also use this information to determine a premium. Applicants with a good credit score and stable financial history will get competitive rates whereas those with high credit scores and unstable finances will pay a great deal more. So, you’ll want to make sure your financial records are on par now and in the future so that you get the best premium possible for your surety bond.
4. Your consumers value dependability
Upon conception, a thriving small business heavily depends on its reputation among consumers – and consumers unquestionably value doing business with reliable and consistent enterprises. When competing against others in your industry, showing your client that you are willing to ensure and guarantee your work through a surety bond is a great way to help them have a greater peace of mind. Consumers appreciate when business owners go to special lengths to provide an additional sense of security. This extra reassurance could be what sets you apart from the competition and draws customers to your business.
5. If all else fails, somebody has your back
If a principal is having trouble completing his or her work as promised, the surety provider has the responsibility to make sure the job will be finished properly. For example, if your employees or subcontractors do not perform their work appropriately and your consumers are harmed as a result, your consumers will have the ability to recover their losses. If, for some reason, you’re unable to fix the situation, your surety will be there to rectify the problem. Always remember that you’ll have the support of your surety provider.
This article was written by Kristen Bradley SuretyBonds.com, an agency that issues surety bonds to professionals nationwide. SuretyBonds.com helps new business owners and entrepreneurs start up new enterprises every day. The agency hopes to give small business owners insight into the surety bond industry so that they are prepared for the bonding process.