- 15 March 2021
- Surety Bonds
Have you thought about improving your business reputation and attracting more clients to the fold? Have you wondered how to secure high-ticket contracts that have always seemed out of reach? Surety bonds from Denver Surety Bonds might be the solution.
Surety bonds essentially serve as guarantees that you will provide products or services ethically and faithfully in accordance with standard business practices. Having a license and a permit bond ensures that you will meet your professional obligations.
Here are some ways by which surety bonds could be beneficial to your business:
The 5 most important benefits of surety bonds
1. Spares you from penalties related to practicing without a bond
In many industries, practicing without a bond can result in severe penalties. Among the professionals that typically require licensing via surety bonds are:
- Debt collectors
- Private investigators
- Car dealers
In these and other trades, operating illegally without a license and surety bond will entail hefty fines. In some cases, operating without these requirements may even result in criminal charges.
2. Helps boost customer confidence
Having a surety bond is a great way to increase customer confidence in your product or services and your company in general. This is especially important for new businesses or those working in a relatively unfamiliar niche. Because these types of companies are routinely targeted by con artists, having a surety bond could ease customer concerns about your company’s legitimacy.
With a surety bond, customers have the assurance of knowing that you are accountable for your products or services. If you fail to deliver according to reasonable expectations, customers understand that the surety bond will prevent them from losing a significant amount of money.
3. Serves as more cost-effective alternatives to letters of credit
Surety bonds are generally more affordable than letters of credit. Although both serve pretty much the same function and are used for similar purposes, a surety bond can be a more cost-effective option.
Letters of credit and surety bonds are essentially third-party agreements issued by banks. These documents guarantee that the named beneficiaries will be paid a certain amount when specific conditions are met.
Why are surety bonds more affordable options? Letters of credit often come with utilization and issuance fees and other hidden costs. They also tend to tie up the credit capacity of the company.
In contrast, the rates associated with surety bonds are generally stable and predictable. And if you have good credit, they will cost only about 1% to 3% of the bond amount.
4. Eliminates unqualified competitors
In any industry, established and legitimate businesses often work alongside unqualified firms. In an open market, anyone is free to operate and offer their services to the public.
But legitimate businesses with established histories often find themselves losing contracts to unqualified competitors. Surety bonds help clear the playing field by limiting access to incompetent or disreputable firms.
Applicants to these bonds typically undergo stringent review processes that determine their financial security and industry qualifications. Those that are deemed poorly qualified are not granted surety bonds, preventing them from operating legally. This effectively reduces the number of unqualified competitors that legitimate businesses have to face.
5. Opens up more opportunities for business
Finally, surety bonds make more business opportunities available to companies regardless of the industry in which they belong. For customers, surety bonds indicate a company’s financial viability and ethical business operations. All factors being equal, clients are more likely to give their business to companies with surety bonds than those without.
Surety bonds are especially beneficial for public contracts commissioned by government offices. These contracts usually require contractors to have surety bonds because of the necessity of safeguarding public funds and ensuring the timely completion of the projects.
In most cases, the government only grants construction contracts to companies with surety bonds. Unbonded firms usually do not have access to these and other public contracts.
This is often the case with large private contracts as well. Unbonded firms usually find it next to impossible to secure large contracts. Developers are much more likely to grant contracts to bonded firms so that they can recover financially if the construction company fails to uphold its end of the contract.
Surety bonds provide customers with the assurance that the company they are dealing with is legitimate and will make good on its promises. For businesses, these bonds will help enhance their professional reputations and increase their trustworthiness among potential clients.
There are virtually no downsides to applying for a surety bond for your business. If you want to enhance your reputation in the industry and increase business opportunities, getting a surety bond is one of the best ways to do it.
About Mountainside Insurance Management
Mountainside Insurance Management, LLC is a multi-state insurance brokerage and management specialist. We are an independent brokerage and work with over 150 A+ carriers to secure comprehensive coverage for our clients. Our brokerage is committed to providing the highest quality insurance and risk management services at the most competitive premiums with hands-on services tailored to our customers’ needs. For more information about reducing your risk, contact us today at (720) 800-9495.