If you have been told you need a surety bond for your small business, you might confused about what you need to get.
There are 25,000 different types of surety bonds so it is impossible to speak to all of them, but here are five types of bonds that various small businesses might need before they can open their business doors.
As with all surety bonds, the does not protect the business. Surety bonds protects the customers of the business.
If a customer feels they were wronged, they can make a claim against company's surety bond.
#1: License and Permit Bond
A License and Permit Bond is a type of surety bond that small businesses might need before they can receive a business license.
Common types of license and permit bonds include:
- Notary Bonds
- Contractor License Bonds
- Motor Vehicle Dealer Bonds
- Private Investigator Bonds
- Mortgage Lender/Broker Bonds
- Collection Agency Bonds
License and Permit Bonds are required by law. If your license type requires a surety bond, the licensing agency will let you know.
#2: Fidelity Bond
If you want to protect your small business, you purchase insurance. But what type of insurance? How do you protect against your employees stealing from you? How do you protect against theft, embezzlement, or fraud?
That is where a Fidelity Bond comes in.
Fidelity Bonds are a type of surety bond that protect your company from financial loss.
Specifically, Commercial Crime Fidelity Bonds (also called Employee Dishonesty Bonds) protect businesses from book-keepers or employees directly responsible for handling the money in a business. The coverage protects businesses in the event that an employee should steal or embezzle money.
Fidelity Bonds are generally voluntary.
#3: Business Service Bond
If a Fidelity Bond protects your company from employee theft....what if your employees steal from your customers?
This is where a Business Service Bond comes in.
Business Service Bonds protect your customers should one of your employees steal from a customer while on the job.
For example, janitors and cleaning professionals regularly enter private property of homeowners and businesses to conduct cleaning services. If one of your employees steals a diamond necklace from a customer's home, your customer would be covered by the Business Service Bond.
Business Service Bonds are often called Janitorial Service Bond for this reason.
Janitorial Bonds are 100% voluntary, but they are relatively inexpensive and can go a long way in communicating to your customers that you are a business they can trust.
#4: Contract Bonds
Contract Bonds are differ from License and Permit Bonds because they are more job-specific and cover the “performance” of the contract (e.g. meeting a deadline, staying within budget, etc).
They can also cover other parts of a construction project, such as paying supplies, following through on bids, etc.
Common types of Contract Bonds include:
- Bid Bonds
- Performance Bonds
- Payment Bonds
If your construction contract requires a Contract Bond, you will be notified.
#5: Court Bond
While not necessarilly a type of surety bond that a small business would need, court bonds are a type of surety bond.
Small businesses could find themselves in a civil court proceeding in the future. The court might require a court bond before proceeding with a trial.
Court bonds that small businesses might need include:
Do You Need Surety Bond Insurance?
Surety bond insurance for your small business does not need to be a large expense. You do not have to pay the entire bond amount to get bonded.
For example, if you need a $10,000 bond, you do not need to pay $10,000.
You will only need to pay somewhere between 1-15% of the total bond amount.
That means a $10,000 bond might only cost you $100.
The best way to see what you would pay for your small business surety bond is to get a free quote: