The owner of a building under construction must know that the contractor doing the work will be able to finish the work on time and within budget.
Although no one can predict such things with certainty, contract bonds issued to the contractor by a corporate surety help to ease the mind of the building owner.
When issuing a bond, the bonding company is counting on the contractor to be able to finish the job. Bond underwriters look at the “three Cs” for any contractor — character, capacity, and credit. A successful contractor must have all three.
- Character: The contractor must be honest and possess a high degree of integrity.
- Capacity: The contractor must have the experience and knowledge to complete the job.
- Capital: The contractor must have access to appropriate amounts of capital in order to fully fund the project.
Here is a look at the five most common bonds used to secure construction projects.
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