3 Benefits of Contractor Surety Bonds

Before getting into the nitty-gritty of the benefits of Contractor surety bonds, one needs first to understand what surety bonds are and what they entail.

Surety bonds are a three-party contract which comprises the surety, the principal, who is the Contractor and the Obligee. For more about contractor bonds visit https://www.contractorbond.org. It is what makes the critical promise completing the project in accordance to the contract terms. So, surety bonds used in construction can be referred to as Contractor Surety Bonds.

There are three different types of surety bonds and which depend on the form of the contract.

Here are the three different types:

-Bid Bond

-Performance Bond

-Payment Bond

It is also good to know who requires the contractor surety bonds because this is essential in the formation of a contract.

-Public Sector: In the public sector, these entail, maintaining statutory requirements. Within the federal government, it is to protect the taxpayer’s money by ensuring to make use of the lowest bidder available. Within the state and local governments, it is used to protect subcontractors and suppliers.

-Private Sector: Here, it is to make sure discretionary owner requirements are upheld. So for private owners, it will ensure expertise on how the project is handled, while for lending institutions, it will be to enforce the terms of the contract. For general contractors within the private sector, it will be a requirement for bonds from subcontractors.

Benefits and Advantages of Surety Bonds



Before detailing the main 3 Benefits of Contractor Surety Bonds, it is essential to know the advantages.

-Surety Bonds improve the reputation of the contractor as they are deemed capable of completing a project

-No real security is required. Therefore, Contractors can use their assets for business growth or procurement of additional working capital

-Contractor surety bonds can offer a company both financial and technical assistance to the contractor. This then significantly increases the chances of a successful project completion

-It is not necessary for Contractors to pay for the whole facility, they are only allowed to pay for the bond limits.

-Surety bonds bind the Contractor with surety which means, this gives the Contractor access to professional advice from accountants, engineers, lawyers and any other professionals.

-Surety bonds also offer the Contractor with protection in the event a dispute arises between them and the project owner.

-As a result of increased leverage, this gives the Contractor a chance to submit more tenders which leads to additional contracts and revenues.


Contractor Surety bond plays a vital role in construction projects. This because they provide a guarantee that the job will be done as per the term of the contract. Having many advantages over traditional bank guarantees, Surety Bonds also offers specific benefits to the contractor as well as the project owner. The main 3 Benefits of Contractor Surety Bonds are listed below as there may be more benefits too.

-Contractor Surety Bonds ensure that the project will be completed as per the terms of the contract. Moreover, it guarantees the obligee that the lowest bidder will perform as per the requirements of the project at the quoted price.

-Obligees that is the owners are assured the Contractor has the financial capacity to sustain the risks involved in the project or construction business.

-They also guarantee that any loss will be catered for if the Contractor is unable to take up any unexpected cost overruns. Also, it also ensures that the suppliers will be paid regardless of the financial stability of the Contractor.