Checking Out the Financial Credit Zone

A surety bond is a contract among at least three different entities. The best way to describe a surety bond is this: two parties have an agreement on services or goods. A third party would be brought in to issue a surety bond to recover any kind of losses that may be incurred by the first party.

The very first surety bond that comes to mind is a bail bond. This would entitle three parties: the convict, the executive law branch, and then the surety party in the bail bond company. The surety is that the convict is going to show up for their court case. The bailbondsman is the surety.

You can also find surety bonds in all other types of businesses. Surety bonds act essentially as a form of insurance.

In the last two years, the surety bond market has gone through many changes. Claims have increased, and bonding companies have made their requirements even tougher than they were before... and the premium rates are higher than ever.

Of course, this is to compensate for the money they've had to pay out with the rising number of claims, but it makes it difficult for an established business to qualify for a new bond and even sometimes makes it hard to get a renewal of a bond!

Collateral is now becoming more of an influence in the issuance of bonds some surety bond companies actually require collateral now.

There are things a company can do, however, to increase the chances of getting an affordable rate from a surety bond company.

First, always create and submit financial reports with your application. If you're a new company, submit a business plan as well. This can actually reduce your rate by as much as two points don't underestimate the power of sending documentation!

Next, attach your resume to your surety application. Remember, during the underwriting process, the surety company is evaluating how much of a risk they are taking by issuing you a bond. Show that you have qualified experience, and it may affect their decision!

If you have a spouse or someone close to you with excellent credit, consider asking them to co-sign on the application. The more high quality credit on the application, the better! Ideally, everyone on the application should have a 650 credit score or higher; should own property; and should have clean credit.

Lastly, use a surety bond broker, rather than a local insurance agent. Surety bonding is a unique field, and many insurance agents don't have the resources to get you the best policy for your business and for your price range.

About the Author:

Gemma-Leigh Garner is a freelance copywriter that writes on many different business financial topics such as surety bond policies & helping businesses understand the bond application process plus other related topics.

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