Do You Need a Surety Bond?

Surety bonds are typically not something most people choose to think about, but there are certain industries where they, or even a performance bond, are absolutely necessary. In fact certain industries are required by various government agencies to procure a surety bond in order to do business. For instance, in some states a surety bond is required to work as an auto dealer, a contractor, or a pay day lender. These bonds are not insurance, they are simply a guarantee that the bonded entity will fulfill their obligation or service for a third party who they work for or with.

Take for instance a mortgage broker. Most states require a broker to obtain a mortgage broker bond in order to do business in the state. This surety bond guarantees that the mortgage broker will follow the rules and laws set down by the state in the legal code. Most states have a specific statute regulating the mortgage broker, so the surety bond in this case will be specific to not only the industry but also to the particular state. Generally speaking though, a mortgage broker bond will make sure that a borrower or customer is able to recover losses if the broker does not meet their obligation and it will also make sure that any expenses or fines that are issued by the state are able to be met in the event of non-compliance.

It’s pretty clear that a surety bond is an important aspect of running quite a few different types of business. It’s probably easy to overlook from an uninformed perspective, but it is clearly a necessary aspect of business since it allows a company to fulfill their obligations in the event they are unable or unwilling to meet them otherwise.