Frequently Asked Questions About North Carolina Surety Bonds
A surety bond is a contract that binds three parties to ensure that financial and performance-related obligations are upheld and satisfied. Surety bonds are commonly used in the construction industry. Generally, the contractor is the principal, the owner is the obligee, and an insurance company is the surety. The obligee, oftentimes a government agency, requires a bond to prevent financial loss. The principal purchases the bond to ensure that they will complete their work according to the contract. The surety backs the bond and facilitates a line of credit. In the incident that the principal is unable to complete their work, the surety will pay any claims made by the obligee. The principal will then be responsible for reimbursing the surety. But that’s only the beginning.
In this article, a construction attorney in Wilmington, NC, from Cotney Attorneys & Consultants will answer a handful of frequently asked questions regarding surety bonds in the Tar Heel State. Our attorneys are highly experienced at handling bond law cases related to the construction industry, including bond claims and dealing with sureties on the contractor’s behalf.
Can I Get Bonded With Bad Credit?
Contractors with bad credit can technically get bonded, but it will depend on the value of the project and the severity of their credit issues, among other factors. For smaller projects, a contractor’s personal credit may have a tremendous effect on their ability to get bonded. For larger projects, CPA prepared business financials and proof of exceptional industry experience can help a contractor acquire a bond despite credit issues.
Can My Bond Cover a Portion of a Project?
Surety bonds are guaranteed for the full scope of work. Therefore, even if a contractor only needs a bond for 20 percent of a contract, they will still need to obtain a bond for the entire project. Tracking bonds for portions of contracts isn’t feasible.
Can New Contracting Businesses Get Bonded?
Contractors who are either just starting out or are branching out on their own to start a new firm will want to make sure that their personal credit is appropriate for obtaining smaller bonds. Remember that to succeed, good credit is a requisite, but proof of experience is invaluable. If you’re having trouble getting bonded, consult a contractor attorney in Wilmington, NC.
How Do I Gain Access to Larger Bonds?
When your contracting business is growing, you’ll need to continue to take on larger and larger projects to ensure that your cash flow continues to stream inwards. However, there’s one significant caveat: you’ll need to be able to get higher value bonds. Your contractor lawyer in Wilmington, NC, can likely recommend a trusted construction CPA to help you prepare the type of business financial statement you will need to increase your bond line.
If you would like to speak with a construction lawyer in Wilmington, NC, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.