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Do Subcontractors Need a Performance Bond?

There are a significant number of risks that can occur when doing business, which is why Insurance Office of America (IOA) offers performance bonds designed to protect contractors. A subcontractor performance bond is a contractual agreement between a subcontractor and a surety that states that the surety will make arrangements for the work to get finished should the subcontractor fail to complete the project.

Advantages to Requiring Subcontractor Performance Bonds

There are many benefits to having subcontractors bonded which include:

• The surety can prequalify prospective contractors, evaluating their character, experience, and ability to execute the job, helping to eliminate unqualified subcontractors who are not fit for the project, or who may not perform well on it.
• Bonded subcontractors are more likely to take their job seriously and act more responsibly at a job due to signing a formal contract called the general indemnity agreement, which puts them at risk to lose both corporate and personal assets.
• Typically, on big projects, sureties will ask that contractors bond their subcontractors. Therefore, contractors that are familiar with the process will request that subcontractors be bonded without being directed to do so. This allows the contractor and the surety bond company to build and maintain a strong relationship in a complex industry like construction.
• Although the subcontractor bond is meant to protect the contractor and the business owner primarily, being bonded allows subcontractors to receive some support in case issues arise.

How to Obtain Your Performance Bond

Acquiring a performance bond is a simple process. First, you want to get a quote by calling IOA Bonds at 1-866-379-3151 or by filling out a bond request form on our website. We go beyond being bond agents and take pride in providing value and solutions to our clients. For more information about the performance bonds we offer, contact one of our surety bond experts today.

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What is an Immigration Consultant Bond?

Certified immigration consultants in the United States such as independent paralegals, legal document assistants, and immigration services professionals, among others, are required to post and maintain a valid immigration consultant bond. The bond is mandatory to receive certification from the appropriate authority in their state of operation. What is an immigration bond?

An immigration consultant bond serves as protection for the state and general public to protect customers pursuing immigration consultation from illegal actions on behalf of the business. Such unlawful activities can include fraud and misrepresented information. Immigration consultants who are certified put their clients at ease by letting them know they are working with someone who is following the law and will give them honest consulting.

Like with other types of surety bonds, an immigration consultant bond is a three-party contractual agreement which includes:

  • A principal – the business
  • An oblige – the state authority who will certify the consultancy
  • A surety – the entity supplying the bond

Should an individual go against state rules their business is required to follow, the affected party can make a claim on their bond.

Past Scams

Those looking for help with immigration issues often prefer to hire an immigration consultant instead of an attorney. While immigration consultants can help consumers fill out important documents and submit the forms to government agencies, they cannot offer legal advice or represent anyone in Immigration Court.

Sometimes, dishonest immigration consultants take advantage of consumers by doing things such as:

  • Pretending to be an immigration consultant or lawyer when they aren’t one
  • Accepting a consumer’s money and not delivering any services
  • Convincing a consumer to lie on an application or to an INS agent
  • Holding onto a consumers paperwork and charging them money to get them back
  • Filing an inaccurate application
  • Charging a consumer money upfront but then requesting more money to continue the work
  • Making false promises

If you’re looking to become a certified immigration consultant, you’ll want to work with a reputable bond company that can ensure you meet the requirements of your state authority, so that you are fully compliant. At Insurance Office of America (IOA Bonds), we have over 29 years of experience providing our clients with exceptional service. Call us today at 1-866-379-3151 to get your immigration consultant bond process started.

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Alcohol Beverage Tax Bond Requirements

To manufacture, distribute, or sell beer, wine, or liquor, you must first have a surety bond in place to guarantee taxes will be paid on all alcohol transactions. The alcohol bond also referred to as the liquor bond helps protect the state if you are unable to pay collected taxes or falsify sales records. alcohol tax bond offered by IOA Bonds

Three-Tier Licensing System

Since 1933, a three-tier licensing system for the distribution of alcoholic beverages has been used, which requires the manufacturer, distributor, and vendor stay separate and independent of each other. Meaning, the manufacturer (supplier) can only sell to the distributor (wholesaler), and the distributor to the vendor (retailer).

Though there are some exceptions to this rule depending on the state, the three-tier regulatory system acts as a ‘checks and balances’ for the way alcohol is sold and distributed from one licensed tier to another throughout the system.

The only state that doesn’t follow a three-tier system, and has their own privately operated retailing and distribution system, is the State of Washington. In Washington, retailers can purchase alcoholic beverages directly from manufacturers.

Surety Bond Requirements

Each state requires specific types of alcohol bonds. Businesses such as restaurants, liquor stores, wineries, and breweries, must have an alcohol surety bond to receive a liquor license. Typically, businesses acquire a surety bond each year. However, renewal requirements differ from state to state.

Get Your Alcohol Beverage Tax Bond Today

If you need an alcohol bond, start the process today by calling 1-866-379-3151 or by filling out our quick and easy individual or business bond application online. With over 29 years of experience, Insurance Office of America (IOA Bonds) can get your bond approved and issued faster than other agencies.

 

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What is a Customs Bond?

What is a custom bond?A customs bond is a contract used to cover any potential duties, taxes, and fees that may accrue from importing merchandise into the United States from other countries. Without having a properly executed bond, merchandise cannot clear customs. This type of bond is usually required when imported merchandise being brought into the U.S. for commercial purposes is valued over $2,500, or if you meet other federal agency requirements, such as importing firearms or food).

Different Types of Customs Bonds

While there are many kinds of bonds depending on the amount and type of transactions that are involved, two of the most common bonds obtained for clearing import shipments include:
• Single Entry Bonds – Can only be used once for a specific location
• Continuous – Will cover all transactions for an entire year
To be allowed to clear your goods through the U.S. Customs and Border Protection (CBP), a “single entry” or “continuous bond” can be obtained through a resident U.S. surety company. Doing so will allow the broker’s bond to secure your transaction(s). The type of bond needed is usually determined by how often a company imports products. If you only import occasionally, the single entry bond will work for you, but if you frequently import through multiple ports of entry, the continuous bond is recommended.

Is it hard to obtain a Customs Bond?

To obtain a customs bond through IOA Bonds, you will need to complete a simple application. The cost is 1%, and approval usually takes 1-2 business days. Although filling out the form is easy, getting a customs bond can be tricky. In order to be approved, your application must be reviewed accurately to ensure there are no errors.
The single entry bond can be challenging to secure because it poses more of a significant risk to the surety since it is not seen as the principal’s primary business. Therefore, the continuous bond is more commonly suggested, particularly since it can be used for multiple transactions and different points of entry.

Let Us Help You with Your Bond Needs

At IOA Bonds, our licensed brokers have an in-depth knowledge surrounding U.S. Customs compliance. We will assess your entire import process and provide guidance on how to advance past any challenging customs transactions. For more information regarding customs bonds, please contact us today by calling 1-866-379-3151.

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Obtaining a Bond with Challenged Credit

obtaining a bond with challenged creditBecause a surety bond is a credit product, and not an insurance product, a person’s credit report is pulled and used to qualify them for a commercial surety bond.

Why Does Credit Matter?

Surety companies use credit history as a way to assess how you may handle a bond claim should it occur. If your credit score is low, an underwriter may feel that you have not been responsible with your financial obligations in the past. Since you will be held accountable for paying the claim on your bond, including legal fees, surety companies want to know you will pay them back if they ever have to pay out on a bond claim.

What is Considered Bad Credit?

A FICO score of 650 and below is considered to be bad credit, or non-standard. If your credit score is low, you can still obtain a bond. However, the conditions will be a lot more demanding.

How Do I Get Bonded with Bad Credit? First, you will need to apply for the bond. Once your application has been approved, an agent can let you know how much your bond premium will be. After you pay your premium and sign the contract, you will receive your bond. Just remember that if you have bad credit, your interest rate may be higher.

How Can I Lower My Premium?

In some cases, it is possible to lower your premium. Having substantial liquid assets, proof of cash verification, or strong personal and financial statements, can help with reducing your rate. Increasing your credit score may also contribute to lowering your premium, although that’s not always a guarantee.

If you have bad credit, or maybe just not enough credit history, finding a surety company that will bond you for a project can be challenging. At IOA Bonds, we specialize in working with those who may not be able to get a bond through the standard market. Contact us today by calling 1-866-379-3151 and let us help you get bonded despite your challenged credit.

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Surety Bond vs. Letter of Credit

Surety bonds vs Letters of creditA surety bond and a letter of credit (LOC) are similar because both are used to guarantee performance under a contract. However, there are variances in the costs and benefits, which make surety bonds and LOCs different.

Choosing the correct form of risk management can make a huge difference in regards to limiting exposure employee’s face while working in dangerous industries such as construction.

Surety Bond

A surety bond is an agreement made among three-parties, the surety, the project owner (obligee), and the contractor (principal). If a contractor defaults, the performance bond helps protect the owner from nonperformance and financial liability.

A payment bond such as a labor bond and material bond helps protect specific subcontractors, laborers, and material suppliers should there be no payment made by a contractor.

  • Borrowing Capacity – Usually issued on an unsecured basis, performance and payment bonds are typically provided based on the company’s financial strength, experience, corporate and personal reimbursement. The bonds that are issued will not diminish the contractors borrowing capacity, but instead, may be seen as a credit enhancement.
  • Prequalification – A surety company such as IOA Bonds, looks at various factors to validate that the contractor is capable of completing the work set under their contract to avoid defaulting.
  • Duration – Surety bonds remain in effect for the length of the contract plus a maintenance period.
  • Cost – The bond is project specific for the length of the contract. The cost is included in the contractor’s bid price which is generally 0.5% – 3% of the contract price.
  • Coverage – At least 10% coverage for maintenance of defects the first year after completion.

Letter of Credit

Obtained through a banking or lending institution, a LOC is a cash agreement to the owner, who can call on the LOC as needed. The LOC turns to a payment for the owner and to a loan on which interest is paid by the contractor. The performance of the contract has no significance on the bank’s responsibility to pay on the LOC.

  • Borrowing Capacity – Bank LOCs cause the contractors line of credit to lessen and show on a contractor’s financial statement as a contingent liability.
  • Prequalification – The bank will check the collateral’s quality and liquidity to ensure the contractor will be able to reimburse the bank if a demand is made upon the LOC. If so, no further prequalification is required.
  • Duration – Surety bonds remain in effect for the length of the contract plus a maintenance period.
  • Cost – The bond is project specific for the length of the contract. The cost is included in the contractor’s bid price which is generally 0.5% – 3% of the contract price.
  • Coverage – At least 10% coverage for maintenance of defects the first year after completion.

Both the surety bond and letter of credit are underwritten and priced based on the credit strength of the indemnitor. Sometimes the fees for a LOC seem to cost less than a surety bond’s premiums. However, the LOC restricts the use of your liquid capital, causing you to pay more.

Unlike a LOC that can be drawn upon by merely presenting a demand to the bank, a surety bond permits a detailed investigation into whether a claim on a bond is valid or not.

If you need help deciding whether a surety bond or a letter of credit would work better to help protect your business, then contact the professionals at IOA Bonds today by calling 1-866-379-3151 or by completing the contact us for a quote form online.

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The Importance of Having a Janitorial Bond for Your Business

Janitorial bondA janitorial bond (also known as housekeeping surety bond, maid surety bond, or residential cleaning surety bond) is used by cleaning businesses, whether commercial or in home. The bond is used as a form of protection for their customers, which reimburses them in the event an employee steals from them while cleaning.

With so much competition in the cleaning business, being bonded makes you more marketable by letting clients know you take your responsibilities seriously and can reimburse them should any accidents take place. Other ways being a bonded janitorial or cleaning business can help benefit your business include:

  • Protecting your business should an employee steal. Even though you selected your employees carefully, and ran background checks on each of them, you can’t account for everything that may happen in the future. If an employee does decide to wrongfully steal from a client, your bond will help cover the cost of the theft.
  • Helping you appeal to customers. Being bonded is a great marketing tool, and having your customers trust is vital to having a successful cleaning business. Whether you clean the inside of homes or commercial buildings, your customers want to know their personal belongings are going to be kept safe. Having a bond communicates to your clients that you take your obligations very seriously. Knowing that you’re doing all you can to keep your client’s private spaces protected, helps comfort customers.
  • Letting you worry less. Unfortunately, you can’t guarantee that your business won’t be convicted of misconduct. However, having a janitorial bond in place enables you to worry less about what you would do financially should you ever have to face criminal charges.
  • Safeguarding valuable items. If any employee accidentally breaks something in a customer’s home, your bond can help cover the replacement costs. This can be exceptionally helpful if you don’t have a lot of disposable money at certain times.
  • Filling coverage gaps. Even though your general liability insurance covers many incidents, it doesn’t include losses due to employee theft. Having a janitorial bond will provide complete protection and fill in insurance coverage gaps.

Although certain factors are looked at such as how many employees you have, what kind of services you provide, and where your business is located, janitorial bonds are relatively affordable. The bond can be written up to $100,000 with immediate approval depending on a company’s headcount and requested coverage amount.

Work with a Bonding Professional

If you want your business to have additional credibility, you can pay an insurer to get your cleaning company bonded. Keep in mind, however, that all bonding companies are not the same. It’s important to work with an agent who has experience with janitorial bonding and can recommend an appropriate policy to ensure your business is protected no matter what type of situation should arise.

When filling out a bond application, you will need to include your business entity information, contact information, and financial information. After your application has been reviewed and approved by the bonding company, you’ll pay the bond fee and receive your bond certificate.

Janitorial bonds are voluntary, easy to get, and many times do not require a signed application. For questions or more information on how having bonds can help your business, contact IOA Bonds by calling us at 1-866-379-3151 or begin your quick and easy bond application on our website.

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SBA Joint Venture Agreements

It is no secret there is much more work available for 8(a) and disadvantaged businesses. Since 1969, Federal contracts were viewed as an effective means to stimulate the growth of the minority business community. According to the U.S. Small Business Administration, Section 8(a) of the Small Business Investment Act of 1958 was determined to be the best practice for awarding those contracts by improving and stimulating the national economy and the small-business segment, as well as allowing the flow of private equity capital and long-term loan funds. This provides financing, growth, expansion, and modernization which are not available in adequate supply.

One of the major challenges facing 8(a) contractors is that many do not qualify for larger jobs due to a lack of resources, or they cannot get the bonding for the project. Two programs that can help overcome these challenges are the Joint Venture Agreement and the Mentor Protégé Program.

The government is wary of large contractors that solely have an 8(a) Business Development Program as the paper principal of contract. Therefore, a Joint Venture Agreement must be pre-approved by the Small Business Administration to be considered legal.

An 8(a) joint venture arrangement will only be permitted under the following conditions:
• The 8(a) contractor lacks the necessary capacity to perform the contract on its own
• The joint venture agreement is fair and equitable
• The venture is of substantial benefit to the 8(a) contractor
• The 8(a) contractor contributes substantial resources or expertise to the joint venture

To meet requirements of the Business Development Program, the 8(a) must perform at least 40% of the contract. In addition, the project contract must be in the name of the joint venture.

There are silent joint ventures as well for purposes of bonding. This is where a surety provides third-party indemnity to the lesser qualified contractor in order to get a bond. The concern in these situations is that the indemnitor is not a party to the prime contract and has no defense should something go wrong. Should the indemnitor try to assert rights, they could be considered a joint venture de facto and the qualification rules would apply. In conclusion, to help avoid complications, 8(a) joint ventures should be met with due diligence and follow SBA standards.

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What is an AMC Bond?

Appraisal management company bonds are surety bonds that many states require businesses in the appraisal industry to get. This bond ensures the state that a company will act in accordance with all federal and state laws surrounding the appraisal industry. AMC bonds are also used to reimburse clients who fall victim to a company that fails to follow the terms of the bond.

 

Who Needs an AMC Bond?  (more…)

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State of California Contractors License Board (CSLB)

The State of California Contractors License Board (CSLB) requires all Limited Liability Companies (LLCs) to secure a $100,000 LLC Employee/Worker Bond in addition to the standard $15,000 Contractor’s License Bond. The bond protects the employees of the LLC who are damaged by their employer for failure to pay wages, interest on wages and fringe benefits. Additionally, if the LLC is also a party to a collective bargaining agreement, the bond shall also guarantee the payment of welfare fund contributions, retirement account contributions and apprentice program contributions.

The cost of this bond obligation will range between 2% to 5% per year depending on personal credit of the applicant.