Small business owners, especially those who are still in their initial stages of their entrepreneurial venture, are normally struggling for funds as this takes a ton of work and earnest due diligence. Perhaps, a portion, if not all of your capital came from loans. So if that is the case, are bonds and insurance really worth it?
Bonds should be included in the priority list when planning to start your business. Bonds, in the business context, are like insurance. They back up a promise to do something. If the promise is breached, the bond pays off to complete the promise. Although this may be new to your ears, there are actually a lot of surety bonds out there that you can max out. But with your limited budget, you may find it hard to choose what bond will fit you. Fortunately, if you need more money to finance your business, there are a lot of options you can choose from to get financing like crowdfunding, pitching to angel investors, business loans, and etc.
To help you, we have narrowed down 5 types of surety bond insurance that will help every small business run their operations effectively with a peace of mind.
- License and Permit Bond
This one is automatic because License and Permit Bonds are mandatory to the law. You need to get this type of bond before you can have your business license. There are actually several types of License and Permit bonds namely:
- Contractor License Bonds – These are bonds that guarantee a construction will go according to what is written in the contract. There are also different subtypes of contractor license bonds but the bottom line of each of them is that all the on-going building will be according to plan. So if you plan to pursue being a contractor, you are required to get this.
- Collection Agency Bond – If you want to be a lender, having this kind of bond will ensure your clients that you will perform with good ethics and honest service. This may include handling their money properly and avoiding any fraudulent activities.
There are still a lot of bonds for small business so make sure you will choose the bond that will match your chosen industry.
- Fidelity Bond
This bond provide insurance against loss resulting from employee misconduct, such as theft or embezzlement, which is not otherwise covered by a company’s regular insurance plan. If you want to protect yourself from inside jobs or fraud by your own employees, you might want to get this type of bond. If you do not have any choice but to entrust your business to someone, this bond is crucial. Even though you trust them, sometimes, the temptation may get the best out of them and steal and embezzle your funds.
- Business Service Bond
After protecting your own business from employee theft, it is now the time to think about looking after your customers. This guards your customers against theft of your employees during working hours. For instance, if you are in the cleaning business industry, your janitors will regularly enter other private people’s house or property, if they steal anything from your client they will be covered by this insurance.
- Contract Bonds
This bond provides essential guarantees to both parties involved in the contract. Performance contract bonds slightly differ from the license and permit bonds. This bond is a more specific type because it includes the performance of the contract like meeting the deadline, staying in budget, quality of work and others. On a wider scale, the biggest difference is the fact that these are used to guarantee the work on public projects. This will give your customers more assurance that you will be able to finish your work as they expected. For example, if you executed a faulty job to a client, they can file a claim. This indeed provides a level of assurance to the client that the contract will be honored. Having this guarantee will help facilitate a better working relationship.
- Court Bond
This type of bond is required by the court to make sure that you will perform your obligations as ordered by a court. There are different types and examples. A fiduciary bond is compulsory to operate as an executor of the state. Plaintiff’s bonds guarantee payment of damages suffered if an action is decided in favor of a defendant. Attachment bonds are required before the court can seize a person’s property to secure a judgment. Cost bonds guarantee the payment of costs associated with appealing a lower court’s decision. And finally, appeal bonds are needed to plea a court decision.