Payment bonds are surety bonds that help guarantee subcontractors and suppliers are paid. They are typically used when a MECHANIC’S LIEN cannot be used, for instance, on public property jobs. These bonds are often used in conjunction with a PERFORMANCE BOND.
A claim can be made on the payment bond if anyone who has been employed or contracted by the construction professional has not been paid according to their contract. If payments are pending or the construction professional feels that the invoices have been paid properly, they can choose to fight the claim.
Payment bonds and performance bonds work similarly to one another. However, the difference derives from what the bond covers. While payment bonds ensure the finances are properly taken care of on a project, the performance bond ensures the quality of the project is on par with the requirements set forth in the contract. Contractors may need one or both of these bonds before they can begin a project.
Applying for a Payment Bond
Confirm with the project manager the terms required for your payment bond. The details of the requirements should be listed in the contract. A bond broker will require financial information from the construction professional as a credit check is required for all surety bonds. The better the credit score of the applicant, the better the rates they can offer. Additional documents may be requested.
Contact Safeline Surety Bonds today to get a quote on your payment bond.