What You Need to Know About License & Permit Bonds
If you are preparing to start a business or striking out on your own as a professional, chances are that you have heard of License & Permit Bonds. As the name suggests, these bonds are required from certain businesses or professions before these can obtain licenses or permits. However, there are some essential facts that you must know about these bonds before buying one.
There are different types of License & Permit Bonds
These bonds are industry-specific. So, there are bonds for almost every industry, such as Contractor License Bonds, Notary Bonds, Auto Dealer Bonds, Collection Agency Bonds, Money Transmitter Bonds, Alcohol Bonds, Agricultural Packers Bonds and even Car Wash Bonds! So, when applying for a bond you must keep in mind the nature of your business or specialization. Check with your State authority regarding which bond applies in your case.
You could be required to get different bonds
Since License & Permit Bonds are industry-specific, any business with two different business verticals needs to apply for a bond for each industry. Buying one type of License & Permit Bonds does not make you automatically bonded in every industry!
Buying a bond is not expensive
The bond amount can seem high for a small business or professional. But the amount is not actually the cost you will be paying when buying the bond. The actual cost of the bond is just a fraction of the total amount, sometimes as low as 1%! The bond cost is set by a surety and depends on many factors, chiefly the credit score of the applicant.
You can buy a bond with bad credit
Having bad credit does not disqualify you. However, you may have to pay a higher fee. A surety company will take into account many factors when deciding on the bond cost, including the financial condition of the business, any bankruptcy filings, balance sheets, or pending court case.
It is not an insurance
Although, most insurance companies offer License & Permit Bonds, it is important to keep in mind that these are not insurance. An insurance policy protects the principal against any future loss. However, bonds protect the general public from any misconduct by the principal. Unlike insurance, this bond ensures that the principal follows the industry rules and regulations.