A contractor can get a surety bond from a company. If the contractor default, the surety company must find another contractor to complete the project. Otherwise, the client must receive compensation for any financial loss.
Four types of bonds exist. Bid bonds make sure bidders enter contracts. Payment bonds make sure contractors pay suppliers and subcontractors. Performance bonds make sure that projects are completed. Ancillary bonds cover other aspects of a contract.
The U.S. Small Business Administration (SBA) helps small businesses obtain surety bonds.
A free program with the City offers up to $500,000 in collateral assistance for surety bond applications. Your business may be eligible if:
- your business is bidding or planning to bid on a project as a contractor with a City agency or the NYC Economic Development Corporation; and
- the project requires surety bonding.