Finishing any construction project relies on a number of pieces coming together, including the budget. We know building projects are costly and can have a significant impact on your business financials. To protect your business and ensure you get the funding you need, you will want to have a construction bond.
Construction bonds protect your business from financial loss if the contractor doesn’t meet project goals and specifications. If something were to go wrong or cause significant delays with your project, it could lead to additional unplanned costs for your business. It’s similar to having an insurance policy — a bond gives you financial protection.
How Do Construction Bonds Work?
Sometimes called contract bonds, these types of surety bonds help guarantee that a project contract is fulfilled. And if it isn’t, your business can file a claim. For most public and private projects, a surety bond is typically required before starting the project.
When you choose to work with Diversified Interiors, we’ll go over the details of your project, including needs, timeline, and cost. Then we’ll identify which type of construction bond is best for your project. Once we identify and agree upon contract terms, Diversified Interiors will secure the bond from a surety company.
Each bond is issued in a specific amount for the maximum compensation that the surety company will extend to your business in the event that the contract is not fulfilled and a claim has to be filed. This amount is dependent on the scope of the project.
Understanding Types of Bonds
There are many types of construction bonds depending on the type of project and work involved. It’s important to note that bonds are dependent on a company’s financials, so if a company cannot handle the financials, they won’t get the funding their project needs.
Three of the most common types of construction bonds are:
- Payment Bonds: These protect you, as the business and property owner, from suppliers or subcontractors trying to get payment from you when a project is finished.
- Performance Bonds: If the contractor fails to finish the project or doesn’t fulfill the expectations of the project, the bond ensures the work is completed according to the contract terms. In this case, the bond company may hire another contractor to complete the project.
- Bid Bonds: These bonds guarantee the contractor you hired has the financial capability and resources (including employees) to fulfill the contract.
Why Reputation Matters for Construction Bonds
Acquiring bonds depends on a company’s reputation. That’s why it’s important to find an experienced and reputable contractor like Diversified Interiors. Our reputation for providing excellence in our work — from planning all the way through to completion — gives us a higher level of bonding capability. As a result, we’ve handled projects for many large companies in the El Paso area.
Interested in learning more about construction bonds and how Diversified Interiors can help you get the funding you need for your project? Contact us to see what our bonding capability is today.