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‘Licensed and bonded.’ You may have come across that term before when searching for a plumber or other contractor, but what does the ‘bonded’ part mean? If you run a business that owes its existence to contracts or short-term projects, being bonded can make a huge difference.

Being bonded means that your work is backed by a surety bond. This is basically like insurance to your clients that you will get the project done as promised or you will repay them for any financial losses if you don’t complete it. You obtain a surety bond from a surety company, for which you will pay a fee, just like with health or life insurance.

In order to qualify for a surety bond, the surety company will do some background research on your company, including looking into your banking and business credit histories, determining your personal and corporate financial status, examining your schedule of current contracts and whether you are completing them as promised. If all these factors show that your company is likely to make good on its contracts, you will be issued a surety bond.

Some surety bonds are guaranteed by the Small Business Administration (SBA), the same federal department that backs small business loans. It will back small businesses trying to secure both private and public contracts. All Federal construction contracts worth $150,000 or more, for example, require surety bonds, as do many state and municipal contracts. The SBA-backed bonds can help smaller companies with little construction experience or financial clout edge out their competition for government contracts because of the added security. Contractors can obtain SBA-approved bonds for project valued up to $6.5 million and under special circumstances, up to $10 million.

While being bonded is not a golden ticket to success, it does help ensure your company has a fair shot at federal and private contracts.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources