Six Mistakes That Could Unnecessarily Drive Up Surety Bond Prices
Posted on: 2 April 2020
When you're on the market for a surety bond, you might be wondering what price you should be expected to pay for a surety bond that meets your needs. Surety bonds can vary widely in price. Fortunately, there are a few things you may be able to do to bring costs down. The following are six mistakes you can avoid to minimize the price of your surety bond.
Not properly presenting your financial documents
There are numerous financial documents you'll need to present when you're getting a surety bond. These include your company's balance sheet, income statement, and cash flow statement. Make sure all the documents you present are organized and accurate. Disorganized or inaccurate documentation is often a warning sign for a surety agency and can lead to higher charges for new bonds.
Being unaware of how pricing works for surety bonds
Learn as much as you can about surety bonds if you need to use them for your business. In particular, make sure that you fully understand how surety bonds are priced. There are numerous factors that impact surety bond pricing. These include the amount the surety bond is for and the finances of the business seeking the bond. Being aware of the factors that are used to determine price can help you to bring down costs. Discuss cost calculations with your surety bond provider to learn more.
Being unable to show adequate liquidity
If the surety bond expenses are high for your company, it could be because you currently aren't showing a good deal of liquidity in your finances. If your company has assets it no longer needs or uses, you could possibly sell them off so that your company has more liquid funds in its name.
Failing to correct credit report errors
Your own personal credit report is likely to be a key factor in determining the surety bond price. Did you know that as many as 74 percent of all credit reports contain incorrect information? You should definitely check your credit report beforehand if you're seeking a surety bond. If you notice any mistakes, you need to contact the credit bureaus and have them corrected.
Purchasing only short-term bonds
Many surety bond providers will lower the price if you extend the term on the bond. If possible, extend the term out to multiple years to reduce surety bond costs.
Filing an excessive amount of claims
Filing a large number of claims in a given year could drive up your surety bond costs. If you can avoid bond claims that aren't absolutely necessary, you could begin to enjoy lower surety bond prices.
Contact a company like NFP, P & C, Inc. to learn more about surety bonds.
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