A performance bond is often tied with a payment bond. Although the two are different, it is important to understand how the two work and how you can get a performance bond yourself. With the help of https://swiftbonds.com/performance-bond/california, you can get a more comprehensive understanding of performance bonds and what you should prepare in getting one.
What is a performance bond?
A performance bond is a type of surety wherein a project owner is given an assurance that his project will be fulfilled based on what was specified in the contract. This comes from the necessity to save the project (and the project owner) if ever the chosen contractor suddenly defaults or was unable to deliver the quality, design, and engineering asked for in the contract.
Aside from the need to protect the project owner, the Miller Act requires public projects that are worth more than $100,000 to go through a public bidding. This public bidding will aid in selecting the right contractor. Once a contractor is selected, he will have to give the project owner a performance bond to assure the latter that he is able to do what is stated in the contract.
Steps In Getting A Performance Bond
When you are chosen as the contractor of a public project, you are required to pass a performance bond. Follow these steps in order to know how to get a guarantee to be given to the project owner.
Step 1: Consult with a financial institution.
The first thing you have to do is to consult with a financial or surety institution. These companies are the ones who will look into your financial statements and records to determine whether or not you are fit for them to make a guarantee to the project owner. Depending on the financial institution, the process for getting a performance bond varies.
Step 2: Apply for a performance bond.
Once you have consulted with the financial firm where you plan on getting a performance bond, ask if they have application forms for your request. Ideally, they have their own forms that you need to fill out fully and correctly. If they don’t have any application forms, you can always check online for a generic application form for performance bonds. Fill this out completely and neatly.
Step 3: Prepare the needed documents and financial statements.
Depending on the scope and worth of the project, the needed documents vary. Take, for example, those who have bigger projects need more guarantees that a contractor has the expertise and experience to be able to follow the contract. Because of this, the financial institution might ask you to pass your financial statements (i.e. balance sheets), a record of past projects, and the copy of the contract that you are entering into.
To make things easier for you and the financial firm, the moment you decide to bid for the project, start preparing the financial statements you think will be needed. At the same time, prepare other necessary documents you’re your credit rating.
Step 4: Wait for the approval of the performance bond.
Lastly, once you’ve submitted the complete requirements, all you have to do now is wait for the approval of the financial institution you applied from. When your request is approved, you will receive a notice and an assurance stating that you are capable of fulfilling the project.
Tips In Getting a Performance Bond Easier
Prepare financial statements beforehand.
To make your application faster and easier, you should be able to analyze and create a visual version of your financial statements. This will help you get on top of fixing and verifying all your monetary transactions.
Get this together with a payment bond.
A performance bond is often used together with a payment bond. This makes sense because both need guarantees from financial institutions of the ability of the contractor to perform what was agreed upon in the contract. With that said, getting these two bonds at the same time will help you spend less time and effort preparing the same documents.
Work with a CPA.
Last and one of the most important ones is to work with a CPA. A CPA will help get those financial statements in order and he or she will also check for accuracy. With a CPA, you can also get help to show that your company has the means and the capacities to take this project on.