Navigating the world of surety bonds can be challenging, especially with so many misconceptions floating around. These myths can prevent contractors and subcontractors from seizing opportunities that could propel their businesses forward. In this article, we aim to debunk some of the most common myths and provide clarity on how surety bonds can benefit your business.
1. Myth: Surety Bonds Are the Same as Insurance
Reality: Surety bonds and insurance are fundamentally different. While insurance protects the policyholder, a surety bond protects the obligee (the party requiring the bond) by ensuring the principal (the contractor or business) fulfills their obligations. Insurance covers the policyholder from risk, but surety bonds ensure that the contractor will complete the project as promised.
2. Myth: Surety Bonds Are Only for Large Companies
Reality: Surety bonds are essential for businesses of all sizes, not just large companies. Many small and medium-sized enterprises (SMEs) use surety bonds to demonstrate credibility and secure contracts. In fact, having a surety bond can open doors for smaller businesses to work on larger projects, enhancing their reputation and ability to win contracts.
3. Myth: Obtaining a Surety Bond Is a Lengthy Process
Reality: Thanks to programs like Avla Accelerated, obtaining a surety bond doesn’t have to be time-consuming. With this program, approvals can be obtained in as little as 30 minutes for contracts up to $1.5 million. This quick turnaround makes it easier than ever for contractors to move forward with their projects without delays.
4. Myth: Surety Bonds Are Too Expensive
Reality: The cost of a surety bond is often much more affordable than people think. Typically, surety bonds cost between 1% and 3% of the contract amount, making it an affordable option for most contractors. Considering the protection and security it provides for both the contractor and the project owner, it is a cost-effective investment.
5. Myth: All Surety Bonds Are the Same
Reality: Not all surety bonds are created equal. There are various types of surety bonds, each serving different purposes. For example, performance bonds ensure that a project will be completed according to contract terms, while payment bonds guarantee that subcontractors and suppliers will be paid. It’s important to understand which type of bond you need for your specific project.
6. Myth: Surety Bonds Are Only for People with Excellent Credit
Reality: While a strong credit score can be helpful, it is not the only factor that matters when obtaining a surety bond. At Avla, we believe your potential goes beyond just your credit score. We focus on getting to know you and your business, taking the time to understand your experience and goals. If your credit isn’t perfect, don’t worry — we’re here to work with you and explore how we can support your growth.
How Avla Can Help
Understanding these truths can help you make informed decisions about surety bonds and how they can help grow your business. At Avla, we are committed to supporting contractors and subcontractors in Texas with reliable surety solutions. Our Avla Accelerated program offers fast approvals for bid bonds, performance bonds, and payment bonds up to $1.5 million — often within 30 minutes.
Ready to take the next step?
Or connect directly with our Business Development Executive, Phillip Alexander, at palexander@avla.com. If you already have a surety agent, feel free to introduce us — we’re happy to collaborate!
At Avla, we make the process of obtaining surety bonds simple, fast, and flexible, so you can focus on growing your business without the added stress.
