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surety bond definition

How Businesses Benefit From Surety Bonds

Category: Finance

Surety bonds are a kind of legal agreement between three parties set in place to reassure one group that someone will be held liable for any kind of loss. These parties can come from different parts of society, but they all make use of the bond to avoid casualties. Some surety bonds are made for the court like surety bail bonds, appeal bonds, and guardianship bonds. Some are made to manage contracts like payment bonds and performance bonds while others are more for commercial businesses in general.

Surety bonds can be used for many kinds of businesses as they make transactions more secure for both you and your customers but some industries can benefit more from these bonds, especially those that involve high-risk transactions. Here are some types of businesses that need to use surety bonds:

Construction businesses

Construction companies deal with the risky task of building structures out of nothing. They use heavy pieces of machinery to carry other heavy materials for the construction work, putting the lives of everyone involved in a certain level of danger. This is why construction companies have to avail of a range of insurance to cover any kind of injury and damages while the process is being done. But for the security of the clients, surety contract bonds are used.

Surety bonds in the construction business assure clients that the set schedule and number of days to finish the project is followed, along with every other agreement in the written contract like major revisions when errors were made in the project. Surety bonds are also used to guarantee that local laws are followed while the construction work is being done.

Transportation businesses

Businesses that aim to transport passengers or items between places are required to avail of surety bonds. This is because many rules and regulations have to be followed, especially for those transportation services that cross borders and can cause damage to public roads and highways. For those that transport people, surety bond ensure that the services are safe for the people and that comfort and convenience are delivered as promised. This also applies to companies like driving schools, freight shipping, and home moving services.

Auto dealerships

Buying vehicles is an expensive undertaking that can quickly turn sour when something goes wrong. This is where surety bonds come in the industry of auto dealerships. Vehicle sellers are required to obtain surety bonds to protect customers from a bad dealership which can range from situations where the dealer lies about the conditions of the vehicle in question, attempts to sell a stolen vehicle, or presents invalid documentation like the title certificate of the purchased automobile. The law requires auto dealers to avail of surety bonds even before they get their dealership license to protect the welfare of the buyers.

Travel agencies

Travel agencies are services that offer to do the stressful task of booking your trips for you. You pay them to get you seats in a flight, find your accommodation to rest in, and even schedule the activities you want to engage in. Surety bonds make sure that they do these tasks as you asked them to. This protects you from being scammed by fraudulent agents or having to pay for mistakes that you did not make. Good travel agencies can be difficult to find so looking for one with travel bonds that state claims for your protection can make your travel more satisfying and enjoyable.

Collection businesses

debt collector

Collection businesses deal with big amounts of money. These businesses that handle mortgages, insurance, loans, and other kinds of finances are required to obtain surety bonds to ensure the safety of their client’s funds. Because of the continuous flow of large amounts of cash in these businesses, there is a higher risk of loss, especially for the clients.

Surety bonds will ensure that these companies abide by the contract and ensure that fraud, misuse of funds, unethical practices, and other illegal operations will not hinder the transactions with the customers. It also adds a level of professionalism that clients tend to look for when doing business with these companies.

 These businesses are mostly required by the law to use surety bonds. But other businesses can also use it to avoid financial losses. Mostly for the safety and assurance of your clients, surety bonds will help to make your business more trustworthy to the eyes of the public. Talk to your mentors and business consultant to find the right kind of surety bond for your business. The appropriate one might help you to grow your business towards a brighter future.