I would like to write about some surety bond falsehoods that perk up their ugly heads from time to time.
Surety Bond Myth one:
I need two bonds, one for each state I am operating in. A broker told me that I could get a discount if I buy two bonds from them. This is not true what so ever, the surety would have more exposure and generally the rate can go up. When a broker tells you this they are probably charging a broker fee and are reducing the fee on the second bond. Now if the bond for the other state has a lower liability and the surety company has a lower filed rate it may be true. This is not the case 90% of the time.
A way to get a lower rate for your surety bond is if you buy your bond for multiple years than you would receive a discount for the additional years.
Surety Bond Myth two:
The bank told me that if I get a bond they would loan me the money The answer in 99% of the time is no. If a bank won’t lend you the money you probably don’t qualify for the loan. If you can’t qualify for the loan you probably can’t qualify for the surety bond. Now I am not telling you not to try to get a bond for a loan because you maybe one out of a million that may get it. The likely hood of getting it is slim to none. The surety a few years ago did do financial guarantee apostilles bonds, but the fall of Enron and a few other companies caused many sureties to go out of business. Since the fall of Enron surety companies have stopped securing loans.
Surety Bond Myth three:
The broker told me that they would not run credit. Unless it’s a notary bond or maybe a defective title bond the surety is going to run credit. 99% of the time the surety will perform and review your credit. If you wanted a loan to extend credit from the bank wouldn’t they run your credit? The same philosophy goes for the surety because they are extending a form of credit too.
Surety Bond Myth four:
I was told I can use this bond for every state. If you are referring to a state bond this is not true. Each state has their own bond form and surety bond regulations. If it is a for a federal bond like an ICC broker bond which is a federal bond then you could yes this for each state. Keep in mind just because you have a federal bond does not mean that the state does not require you to have a bond too.