Some construction companies must purchase a surety bond before they can receive a business license in Florida. The Florida Construction Industry Licensing Board provides an option of purchasing a surety bond for anyone with a FICO credit score below 660 as a way to prove financial solvency. A surety bond proves that the contractor is financially solvent.

A surety bond is like a letter of credit from a financial institution but is often cheaper to get. Bonds do not affect the amount of credit available to the business. Startup contractors may find the difference in credit availability and cost important if they have limited credit and want to preserve it for tools and materials or other business needs.

Guarantee the Performance

Another bond requirement is for contractors working on public projects. Contractors must have a performance bond before they can work on a project for a state or local government entity. The restriction applies to contracts over $100,000. The government entity in control of the project may also exempt contractors when the contract is between $100,000 and $200,000.

A performance bond is a guarantee that the work will match what the contract promised. A customer may use the bond to receive compensation if a difference occurs between the finished product and the contract. The company issuing the performance bond may also hire someone to come in and finish incomplete work.

Most clients that require performance bonds will want the bond submitted along with the bid. The job description should also list any other bonds needed and when to submit them. After a client accepts a bid, the contractor will secure the other required bonds. Always discuss the fees for additional bonds with a surety company to factor their cost into the bid. 

Promise of Payment

The Federal Miller Act, the same law that requires contractors to have a performance bond for public contracts over $100,000, also requires a payment bond for the same projects. A payment bond protects laborers, suppliers, and subcontractors involved in the project under the construction company. The bond ensures each entity receives its payment.



The payment bond protects the government project. Unpaid laborers and others can place construction liens on projects when they do not receive payment for their work or materials. Construction companies may need to present a payment bond to the customer with their bid, or the client may request it after the acceptance of the bid and before the work begins.

Reassurance of Quality

A surety bond to consider, or one that clients may request, is a maintenance bond. The protection under this bond guarantees the quality of the materials, the work performed, and the design for a specific amount of time. The bond is a guarantee of repairs or replacements if problems arise because of incorrectly performed work or faulty materials.

If problems with the project begin after the time specified with the bond, the maintenance bond will not apply. The client can still expect the contractor to repair the problem or replace faulty materials. So, despite the bond acting as insurance for the contractor for a certain amount of time, it is still necessary to have commercial insurance protection.

Florida contractors have many opportunities for growth, but every contract comes with risks. Business owners must invest in bonds and insurance to keep their livelihood secure. At American Quality Assurance Group, we offer surety bonds, commercial insurance, and personal insurance policies to help protect everything important to you. Contact us to learn more.