FINANCIAL MANAGEMENT - BONDING
This is the 42nd of a series of newsletters published on Business Management and Management Skills. Not all topics will apply to your business, but each section will be beneficial to establish company goals and objectives. By reading and studying these newsletter articles, you're taking the first step in achieving your goals.
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Surety bonds are occasionally required on some construction projects to ensure that any damage done will be repaired (heavy trucks cracking concrete driveways, for example). Surety bonds can be likened to an insurance policy and are very low cost. Some types of bids routinely require that a type of surety bond (called a bid bond) be accompanied with a bid for it to be considered. These are also insurance policies, the purpose of which is to provide a source of funds should it become necessary to complete the project in the event that the bidder's company goes out of business before completion of the project. The cost of such bid bonds is routinely listed separately on bid documents. On occasion, the project owner or public entity will elect to delete a bond, in favor of a reduction in the project's cost.
Many contractors will never need to obtain and provide such a bond. After a reputation is established, bonding may not be required. To secure a bond, a contractor must show that he or she has three to four years of financial records reviewed by a Certified Public Accountant, show substantial financial assets over liabilities, and meet other minimum requirements such as having successfully completed projects of comparable size and complexity.
NOTE: For additional information, please refer to the section on Insurance (#50) in this series of articles on Financial Management.
Mike Holt's Comment: I would like to extend a special thank you to L.W. Brittian, a Mechanical & Electrical Instructor in Lott, Texas, for reviewing and editing the various articles in these newsletters. His comments and suggestions have been invaluable in the preparation of my Business Management and Management Skills' Workbook. This newsletter article was extracted from that workbook. Watch for our next newsletter, and as always, we invite your comments and feedback. Send us your real-life experiences. We value your opinions and participation. Please respond to Barbara@MikeHolt.com. And - be sure to visit Mike Holt's Website at http://www.mikeholt.com
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