Surety bonds are essential to any company in the construction business. Whether you are an individual contractor or a large company, surety bonds in NJ can help you operate your business and may be a requirement for certain projects.
What Are They?
Surety bonds come in many different forms, but generally safeguard customers and hiring parties from breach of contract, fraud and penalties. They ensure contractors and construction companies fulfill their contractual obligations. If they don’t, the surety reimburses the customer so it can complete the job and recoup any costs incurred. The contractor or construction company then pays back the surety for the claim.
When Are They Needed?
A company must have a surety bond anytime a customer insists they have one. The government demands them before work can begin on their projects and many private companies do as well. In the event a contract is not honored, surety bonds in NJ ensure customers will be protected and compensated. Surety bonds also have advantages for construction companies; they typically don’t have to set aside collateral in case something happens during a project if they have surety bonds in place. This frees up more of their capital for investment, and they can often earn more interest than what they have to pay for the bonds.
Surety bonds provide a guarantee to customers that they will be made whole in the event a contract is breached.