Performance Bonds

It seems I have gotten a lot of calls lately from my contractor clients asking about performance bonds. Being in a building project myself where my general has abandoned the project (thankfully not a client of mine), I can see why people are requiring this type of bond before allowing a contractor to begin work on a given project. Usually there is a required bond amount set forth by the owner or other interested party and this bond becomes available to that party should the contractor fail to complete the project or portion of the project. Contractors usually have to have these bonds in place, or at least the cost included at the time of bidding a particular project. So, I get calls wanting to know how much these bonds cost so that the contractors can include the price in the bid. Well the rates on bonds is associated with the credit and financial outlook of the contractor. Generally the rate is 3-5% of the bond amount depending on credit. Depending on the size of the bond the application process can be lengthy, and it can take a few days to get the formal quote from the surety company.