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Texas Supply Bond

Texas businesses that supply goods and materials for construction projects often need to obtain Texas supply bonds as an important part of their business planning.

What is a Texas Supply Bond?

You might also hear this type of bond referred to as a supply surety bond in Texas. Under any name, this type of surety bond holds the bonded party (the supplier) financially responsible if they break the terms of a contract. When that happens, the party that purchased supplies may file a claim against the surety bond seeking compensation for damages. A valid claim receives payment from the surety agency, after which the bonded party must pay the surety back.

How does a Texas Supply Bond work?

Imagine someone purchased and paid for supplies but never received them. They can file a claim against the Texas supply bond for the cost of the supplies and for any costs resulting from their failure to arrive - eg. delays on a construction project. The surety agency will investigate whether events transpired as described in the claim and then settle any claim that holds up. Finally, the surety agency will use whatever legal means available to collect the cost of the claim, plus interest and fees, from the bonded supplier - who accepts liability for all valid claims under the terms of the surety bond agreement.

Who needs a Supply Bond in Texas?

Anyone required to get one under the terms of a contract to purchase goods. The purchaser decides if, when, and in what amount a supplier needs to obtain a bond. A contract can't be finalized until someone can prove they have the required bond. Therefore, don't wait to apply for a Texas supply bond.

Why is it necessary to have a Texas Supply Bond?

Purchasers include Texas supply bond requirements in contracts to protect themselves in the event that supplies don't arrive on time, in full, up to quality standards, or otherwise deficient. When a project depends on supplies, there could be serious consequences if those supplies don't meet standards set out in the contract. Surety bonds provide reliable protection against that obstacle, which is why they're common in construction contracts.

Who are the parties involved in Texas Supply Bond?

All types of surety bonds have three parties involved.

  • Principal - The supplier who obtains the surety bond and takes responsibility for paying claims.
  • Obligee - The purchaser who has the right to file claims against the surety bond seeking damages.
  • Surety - The agency that issues and backs the surety bond. The surety settles claims to the obligee on behalf of the principal, but the principal must promptly pay that debt back.

How much does a Texas Supply Bond Cost?

Known as premiums, surety bond costs depend first on the size of the bond. In the case of supply bonds, the size usually relates to the value of the supplies. Premiums are a small percentage of the size of a bond. Exactly what percentage depends on the bond seeker's credit score and financial history. Bad credit results in higher costs. However, with the help of a surety agency like Viking Bond Service, bad credit doesn't have to result in being denied a surety bond.

How to apply for a Texas Supply Bond

Be prepared to supply these documents:

  • A completed bond application
  • A copy of the Texas supply bond requirements
  • A recent financial statement
  • Additional items the underwriters may ask for

Using this information, underwriters will quote you a price for the premium. Lastly, pay the quoted price to activate the bond, after which you will receive a document proving you've met the surety bond requirement.

Viking Bond Service for Texas Supply Bond

Suppliers across Texas and across the country work with Viking Bond Service as their trusted bonding partner. Find out what makes us a nationwide leader. After completing the correct supply contract bond application you can receive a quote back in as little as 24 hours. To get started with the application that best fits your contract, or for additional information, call us at 1-888-278-7389 or use the contact form on this page.

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