Why Building Businesses Like Yours Get Surety Bonds
Building businesses are a great way for a skilled construction expert to gain financial independence. However, if you ever have to take out a loan to expand your range, you may want to consider a surety bond. These can help to protect you from serious concerns that are hard to predict.
Understanding The Nature Of Surety Bonds
A surety bond works as a way of ensuring that you pay your loan on time. In layman terms, it states that people who loan you money can file a claim if the bond's promise is not met. They are typically used with businesses who are taking a small risk, such as expanding their building services to new ones.
As a result, a growing number of lenders are providing surety bonds to borrowers like you. While they might seem like they only benefit the lender, they can also be a useful way for you to get the money that you need and to stay on good terms with your lender.
How They Benefit Your Building Business
A good surety bond benefits building companies by showing lenders that you are trustworthy and capable of paying back your loan. It also helps to make skittish lenders more likely to borrow to someone new. If you have never reached out to a particular lender, a surety bond can be a great tool for providing them with the security they need to trust you.
Cost Factors Will Vary
When buying a surety bond for your building business loans, you need to take the time to understand how much they will cost. A typical annual premium for a surety bond is about 1-3 percent of the bond amount. So if you get a loan for about $100,000 or so, the premium will be between $1,000 to $3,000. For many building companies, this is a fairly low cost.
However, you need to make sure you don't suffer from problematic credit. That's because your surety bond price will increase to as high as 15 percent. As a result, your annual premium for a $100,000 loan could rise to as high as $15,000. Avoiding this situation requires making sure that you pay your credit accounts on time and avoid severe debt.
If a surety bond sounds like a wise decision for your building business, talk to a financial expert right away, such as at Service Insurance Company. They can help choose a great surety bond for your business needs. They can also assess a potential loan and work hard to ensure you don't pay too much for it.
