Commercial bonds provide assurance that all parties involved are sufficiently protected.

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License bonds are required of many businesses.

Numerous local, state, and federal governmental agencies necessitate that businesses secure license bonds—commonly referred to as permit bonds—prior to obtaining a license or permit pertinent to their industry. For instance, if you operate an auto dealership, you might be required to acquire an auto dealer bond before commencing the sale or trade of vehicles. License bonds serve to safeguard consumers against fraud or other forms of harm resulting from the actions of the bonded business. Essentially, they function as a guarantee that a business will comply with all governmental regulations established for its industry.

What are commercial bonds?

Being bonded differs from being insured, as commercial bonds are not technically classified as insurance. Rather, consider bonds as an additional layer of protection for the involved parties. For instance, with surety bonds, the obligee (the party requiring the bond) is safeguarded in the event that the principal (the party requiring the bond) fails to meet the obligations of a contract, or debt either in part or in full. While your business may possess insurance, it may also be necessary to acquire a bond depending on the nature of your work. We will examine several specific categories of bonds below. Additionally, various jurisdictions may impose their own bonding requirements. Here are some examples of the different types of commercial bonds:

• Bid Bonds

• Contract Bonds

• Fiduciary Bonds

• License Bonds

• Lost Instrument Bonds

• Maintenance Bonds

• Miscellaneous Bonds

• Non-Contract Bonds

• Payment Bonds

• Performance Bonds

• Probate Bonds

• Public Official Bonds

• Subdivision Bonds

• Surety Bonds

Bid bonds for contractors and construction.

Bid bonds are typically utilized exclusively by contractors and construction firms. In many instances, project developers require bidding contractors to obtain a bid bond to safeguard their interests. Historically, prior to the widespread adoption of bid bonds, some contractors would submit low bids to secure a contract, only to subsequently increase their prices once the project commenced or withdraw entirely, which often resulted in complications for the project developer. However, with the implementation of bid bonds, project developers can feel more confident in their contractor selections, as bid bonds ensure that contractors possess the financial stability necessary to complete projects and that their submitted bids are both serious and competitive.