Guest Post: What You Need to Know About Surety Bonds

Today's guest post comes from Kevin Kaiser of Kevin has written a very informative post on the importance of surety bonds in most businesses and how it can affect the client relationships that you create. I hope you learn a lot from his post. I sure did.

For small business owners, surety bonds can garner more customers and projects. These bonds, which are often overlooked by busy entrepreneurs, act as risk-mitigation tools that help startup businesses land more one-time contracts or get licensed.

Surety bonds are three-party agreements between a customer, business and surety or insurance company. Basically the surety acts as a third party that holds the customer and the hired business—often contractors—to contractual agreements, laws and regulations. If either party fails to uphold said agreements, the respective party must fulfill them.

There are several types of surety bonds, but performance bonds are commonly purchased. Companies in the technology field often purchase performance bonds to give customers some peace of mind.

Here’s a simple example. Let’s say an IT company gets a surety bond in Florida for a contracted project. The hiring customer—in this case a building owner—wants a local area network set up. By having the bond, the IT company guarantees that the building owner cannot lose any money. If the IT company bails on the project or fails to meet specifics agreed upon in the contract, then the company must repay its customer. In the rare case that the company cannot afford to do so, the surety company reimburses the customer.

Getting bonded makes it easier to pick up more one-time contracts. But completing those projects will likely develop customer loyalty, advertise by word of mouth and establish a company’s brand even in a large market like California.

Sometimes surety bonds aren’t an option—they’re a necessity. Certain businesses, such as health clubs, construction companies and auto dealers, must be bonded before they are licensed to operate. Laws and regulations vary, but it’s best for entrepreneurs to find out what’s required to receive a business license.

Regardless, being listed and advertised as a bonded business will attract more customers. There’s no better way to tell clients that they’re a priority then offering financial security through a surety bond.

Kevin Kaiser is a principal for, a nationwide bonding agency, and has been educating consumers on how surety bonds work for over two years.