Unique Content Article: Benefits Of Purchasing A Surety Bond In Los Angeles

Benefits Of Purchasing A Surety Bond In Los Angeles

by Olivia Cross

The number of contractors taking up surety bonds has been on the rise over the last few years. Surety bonds are quickly replacing the various financing options that have been in the market over the years. Nowadays, agents prefer surety bonds to bank guarantees and letters of credit. The increase in number of bonds held can be attributed to the numerous benefits that come with the bonds. A <A href="http://www.cisburbank.com">Surety bond in Los Angeles</A> can be obtained from various bond issuing companies and here are some of its benefits.

Surety bonds are relatively cost-effective compared to other financing options. While various options such as bank guarantees, letter of credit and retention fees have an effect on the balance sheet liability, the bonds do not have an effect on the balance sheet. The assets of the contractor will not have to be tied up in order to assure completion of a specific task. These alternatives are affordable because the contractor will undertake multiple jobs at once as a result of the credibility. This credibility will give the contractor a greater capacity to borrow from lending institutions.

Bonds guarantee that the contractor will receive payment from the customer once the project is completed. The issuer adds some clauses that require both parties to satisfy their contractual obligations. Unlike other financing options, failure to satisfy the obligations stated under surety bonds attracts penalties that are legally enforceable.

Another benefit is that there are many contract types available. Contractors, therefore, have an option to choose from the extensive ranges which include commercial, residential engineering, civil and mining projects. Therefore, it provides an opportunity to all contractors to purchase an option that suits their needs.

Bond issuing companies do not require tangible assets as collateral. In most cases, banks and other financing institutions will require contractors to provide physical assets as collateral so that they may qualify for financing at lower interest rates. Providing company assets as collateral limits the ability of the firm to secure financing from other financial institutions. Companies that issue the product provide contractors an opportunity to secure funding in order to undertake various projects.

Securing new contracts is not easy. It requires some recommendation and guarantee that the project will be undertaken. In most cases, financing options like the letter of credit may not guarantee the project owner that the project will be undertaken. Bond companies on the other hand provide unconditional guarantee to the project owner that the contractor will be able to complete the task. Therefore, purchasing surety bonds is a quicker way of securing contracts from various customers.

Bonds provide contractors with the freedom to make bids on new projects. The bond issuers help in providing timely certifications in order to answer any questions that may arise. The issuers do not limit the number of projects that the contractor should undertake due to financial limitations. On the other hand, banks and other financial institutions may limit the number of projects that the contractor may bid if they significantly increase the risk.

Bonds help contractors prevent over-funding. Over-funding occurs when projects utilize more funds than they are required. The bond providers help the contractors in providing estimates for the project, hence enabling efficient utilization of resources. Therefore, the bond providers help in improving profitability of the project.



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New Unique Article!

Title: Benefits Of Purchasing A Surety Bond In Los Angeles
Author: Olivia Cross
Email: nathanwebster335@live.com
Keywords: insurance, finance, business, economics, economy, sales, marketing
Word Count: 555
Category: Insurance
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