Many Canadian business owners despite the words surety bonds. They do so because they’re worried that they’re going to be paying outrageous prices to acquire the bonds that they need. Well, you should know what a surety bond is and why they are essential for the success of your business. If you do not have the right surety bonds, there is a good chance that you will not be able to obtain the job and things will go downhill from there. Simultaneously, you have to understand that there is no universal price for surety bonds. The prices are going to vary significantly. And, you should know that the price will depend on numerous factors.
With that being said, you should read this in-depth guide so you can find out what is going to impact the price of the surety bonds you need.
Additionally, you can also read about how surety bonds compare vs posting your own cash.
You’re Paying A Percentage
Remember that you’re not paying for the cost of a surety bond in full. You will pay a percentage of the bond amount. This is one of the biggest factors that will impact the price of your surety bond. There is a good chance that the client is going to demand a specific amount. For instance, they may require you to obtain a surety bond for $50,000. In this type of situation, the surety company will analyze your company and the risks involved. Then, they’ll use this information to determine what percentage of the bond you will be required to pay.
If your company is considered riskier, they’ll force you to pay a higher percentage and vice versa. Again, you’re not going to be paying $50,000. The bond will be for this amount but you will be paying a percentage of the total. The percentage that you pay will be determined by the surety company. And, you have to understand that the company in question will analyze various factors to determine what percentage of the total bond that your company will be required to pay.
Below, you will find out more about the factors that the company will take into consideration when attempting to find out how much to charge your company. Remember that you can take steps to minimize your costs. For instance, you should make sure that you’re working with a good surety company. Unfortunately, finding a reliable company can be tough. We can help.
We’ve been working in the Canadian surety industry for many years. If you need assistance finding a good surety provider, you should get in touch with us. We’ll point you in the right direction and hook you up with a good company that will treat you right and offer fair prices!
Area
First and foremost, you should know that your location is going to have a big impact on your prices. Some areas are riskier for companies. The surety provider is going to do extensive research on the risks that they’re facing. They may find that companies in Montreal face more surety bond claims than companies in Vancouver. If they find this out, they’ll have to take steps to protect their investments in Montreal. To do that, they’re going to raise the costs.
This will make up for the risk and allow the surety company to make money regardless. With this in mind, you should know that your area is going to impact the cost of your surety bond. If you are operating in a Canadian territory or province with a lot of claims, you’re going to be paying more. Otherwise, the prices will be minimized. Unfortunately, there is little you can do to change this aspect of surety bonds.
The Bond In Question
Now, you should know that your company will most likely be required to obtain several bonds. If you’re working with various projects, you’ll probably need to obtain several contract bonds. You’ll need a bid bond when you place bids on a new project. Simultaneously, you’ll need to obtain a performance bond before you sign the contract and begin working on the project in question. Well, you have to understand that the risks are going to vary based on the bond that you’re working with.
If you’re dealing with a bid bond, the risks are slim. You are obliged to stick with the original bid that you placed. If you do not, a claim can be filed against your surety bond. With a performance bond, a lot more things can go wrong and this puts the surety company at a greater risk. This is something that the company is going to remember when trying to find out how much to charge you. With that being said, you should know that the bond you’re trying to acquire will indeed impact the price.
If the bond is considered riskier, you’re going to pay more. If it is safer, you’ll pay a lower premium. If you’re acquiring a license bond, there is a good chance that you’ll end up paying anywhere from 1 to 10% of the total. The company will consider your financial health to determine what percentage they’ll make you pay.
Financial Health
Ultimately, the surety bond company wants to make sure that your company can fulfill its obligations. Simultaneously, they want the reassurance that your company can pay its debts. This is why they’re going to consider your company’s financial health when trying to find out how much to charge you. If your company is struggling to survive, your finances are going to be in shambles. The surety company will notice and they’ll likely consider your company a higher risk. After all, there is a higher chance that your company will not be able to pay its debts and that could negatively impact the surety company.
If your company is in good shape financially, the risk will be minimized and the company will give you a better deal. Either way, you have to understand that your company’s financial status will have a big impact on the percentage that you’ll end up paying. To avoid overpaying, you need to make sure that you keep your company in good financial shape.
Your History
You have to understand that the surety provider is going to do everything they can to minimize their risks. One way they’ll do that is by not working with problematic companies. If they are going to be working with problematic companies, they will be charging them a lot more. This is why the surety company is going to dig into your company’s history. They want to know whether or not you’ve had claims filed against your bonds in the past.
If they find out that your company has had numerous bond claims, there is a good chance that they’re going to shy away from working with your company. They’ll be worried that your company will be hit with another claim in the near future and that is a risk many companies will not take. If you have a bad history with surety bonds, you’ll have a tough time getting a surety bond. Alternatively, you might be able to acquire a bond but you’ll likely pay a lot more for that bond.
With this in mind, you need to take steps to ensure that your company maintains a flawless reputation. You should avoid ticking off your customers or they might file a claim against your company. That would result in your premiums climbing higher in the future. You need to make sure that your company’s history remains flawless. This is one of the best ways to keep your costs minimized.
The Company
Finally, you have to understand that the price is going to vary based on the surety company that you’re working with. Sadly, there are some companies that are going to overcharge Canadian business owners. They have every right to do this. You have to remember that you have every right to avoid working with these companies. You should never overpay for surety bonds. You need them but you do not need to work with shady companies that are going to overcharge. The good news is that there are many excellent surety providers in Canada.
And, you should know that we can help you. Our company has been in the Canadian surety industry for many years and we have strong relationships with some of the best surety providers. If you want to work with a good company that has reasonable prices, you should get in touch with us. We’ll help you connect with an excellent surety company in your area.
If you would like to learn more or speak to a broker or agent regarding your bonding needs, you can contact us or request a quote.
