In you’re a supplier or contractor in the construction industry you’re probably already aware of supply bonds. Whether you’ve heard of or been named on a one before it’s always a good idea to make sure you fully understand what being part of a supply bond means for your business. Let’s take a look at the basics:
These bonds are used to protect the purchaser of supplies
Supply bonds are often requested by the purchaser of supplies to protect their financial stake in the contract. The bond provides financial reimbursement should a supplier fail to meet the terms of a supply contract.
There are three people involved in a supply bond
Every supply bond will have named people or organizations: the principle, obligee, and surety. The principle is the person or organization, which in this case is the supplier, that takes out the bond because the obligee, who is the purchaser, requires them to. The third named entity is the underwriter of the bond; this is the organization that will pay the purchaser should the supplier breach the terms of the contract.
What do supply bonds mean for purchasers?
A surety bond can be a useful financial tool for individuals, businesses, or organizations that are entering into a purchase agreement with a supplier. A surety bond ensures that the goods outlined in the contract are provided. If the contract terms are breached the surety will provide financial recompense to the obligee. Put simply, the purchaser of the bonds won’t lose money should the goods not be delivered.
What do supply bonds mean for suppliers?
Supply bonds impact the supplier in two main ways. Firstly, the supplier has to go through the process of applying for a supply bond and paying the premium to get the bond underwritten. The actual process of acquiring a bond is actually pretty simple. Many supply bonds can be obtained within a few days once the application process is completed and the premium paid. Viking Bond offers an online application to make the process quick and easy.
Secondly, the supplier needs to be aware that a bond is a form of credit not insurance. This means that they are responsible for repaying the surety, who can also be known as the underwriter, should a claim be made against the bond. As long as the supplier meets the terms of the contract then the bond will not impact them in the long run!
Viking Bond Service can help businesses obtain supply bonds throughout the US. Call our bond experts today to get help with all of your surety bond needs.