How to Get Bonded in Texas

How to Get Bonded in Texas
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When potential clients ask if you or your business is bonded, they are almost always talking about surety bonds. Surety bonds give customers peace of mind because they have a guarantee that the work a business starts will be completed. Many contracts awarded by public institutions and governments, as well as private companies, have a requirement that you are bonded. Surety bonds are offered by surety companies and may be backed by the government.

In a way, surety bonds are a kind of insurance and, in Texas, surety companies work through the state's Department of Insurance. To apply for a bond, visit the Texas Department of Insurance website, as well as the U.S. Small Business Administration website. Both websites post lists of surety companies who can issue bonds.

SBA Bond Program

If you own a small business, as defined by the U.S. Small Business Administration, you may be eligible for an SBA-backed bond. This program will allow you to bid on contracts of up to $10 million offered by the federal government and up to $6.5 million for all other types of contracts.

The SBA lists the surety companies that work with the SBA's program. After applying for a bond with one of the participating companies, the SBA will back your bond, provided you are eligible for the program. To be eligible, you will have to meet the credit, character and capacity requirements of the surety company that offers the bond.

Types of Surety Bonds

Just as there are different insurance policies for different situations, there are also many different types of surety bonds. Most surety bonds are specific to the type of work you do. If you are an agent for athletes, for example, you would get an athlete agent surety bond. If you are a wrestling promoter, you would need a wrestling promoter bond. Just a few other examples include:

  • Automobile Club Services Act surety bond.
  • Credit services organization bond.
  • Commercial storage, reclamation, treatment or disposal facility bond.
  • Course provider bond, driver education school bond or driver education branch school bond.
  • Health spa surety bond.
  • Insurance agency bond.
  • Telephone solicitation bond.
  • Third-party debt collector bond.
  • Veterans organization solicitation bond.

You can find more information on the different kinds of bonds from the Texas Department of Insurance website.

Construction Contract Bonds

One of the most common industries requiring bonds is the construction industry. The Texas Department of Insurance lists four different types of bonds common in this industry.

Bid Bonds or Proposal Bonds

These bonds are often required when you are bidding on an open contract. If you are the lowest bidder and you win the contract, you will be expected to provide the required performance or payment bond before you can start the project. If you're unable to do the work, the customer can then go to the next-lowest bidder and the bond will pay the difference between the two bids.

Performance Bonds

A performance bond guarantees the customer that you will perform the required work in accordance with the specifications in the contract. In addition to private companies that may request a performance bond, they are a requirement for most federal construction projects and contracts for large public work projects for the state of Texas.

Payment or Labor and Material Bonds

A payment or labor and material bond guarantees that you will pay for labor and materials you use to complete a project. These too are a requirement for most federal contracts and any public work project for the state of Texas in excess of $25,000.

Maintenance Bonds or Maintenance Guarantees

These bonds guarantee the customer that you will do the work as required by the contract without defective workmanship or materials. Maintenance bonds or maintenance guarantees are good for up to 12 months. Most performance bonds include a maintenance guarantee. If there is no performance bond, then the contract may stipulate a separate maintenance bond.