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Financial Guarantee Bonds

Financial Guarantee bonds are a general type of surety bond. Financial guarantee bonds do pretty much what the name suggests; guarantee payments on a financial obligation. These bonds come in many forms from tax bonds to commercial lease agreement bonds.

Financial guarantee bonds guarantee that the financial obligation of the bonded party will be satisfied. For bonds like the commercial lease guarantee bond, the bond provides a guarantee that the lease payments will be paid. The bond amount would typically be based on the total annual payment amount of the lease. Bonds like the sales tax bond provide a guarantee that the amount collected for sales tax on taxable goods will be remitted to the state or local government. The bond amount, in this situation, is typically based on an average monthly sales tax calculation.

With financial guarantee bonds, the surety is essentially providing a potentially quicker path of recourse if the party with the obligation to pay does not do so satisfactory. When a claim is placed on a financial guarantee bond, the surety would then be responsible to make payment to satisfy their responsibility to the bond. After a surety pays a claim on a bond, the surety then attempts to recoup the loss from the bonded business or individual. A surety bond works more like a credit line rather than an insurance policy. Even if a surety pays out on a claim, the bonded business or individual is ultimately responsible for the amount paid out by the surety.

Qualifying for a Financial Guarantee Bond

Being that a financial guarantee bond guarantees a person’s or business’s payment to an obligation, the qualification process for a financial guarantee bond is often based on credit and financial standing. Depending on the specific type and amount of the requested bond, a business and/or personal financial analysis may be required to get a quote for these types of bonds. Financial statements are not always required so it is best to speak with an agent to determine exactly what is needed.

Common Types of Financial Guarantee Bonds:

• Airlines Reporting Corporation (ARC) bond.
• Alcohol Liquor Tax bond
• Commercial Lease Guarantee bond.
• Farm Labor Contractor bond.
• Federal Motor Carrier Safety Administration (FMCSA) Freight Broker bond.
• Financially Responsible Officer bond.
• International Fuel Tax Association (IFTA) bond.
• Lottery bond.
• Medicare/Medicaid Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) bond.
• Sales Tax bond.
• Taxpayer bond.
• Utility Deposit bond.
• Wage & Welfare bond.