A bond is not insurance. It protects the other party, and you pay it back.

License and permit bonds

Required by a state or city before it will issue your license.

Without it — The license is not issued and the work is not legal.

Bid bonds

Guarantees you will honor a bid you win and enter the contract.

Without it — You cannot bid public work, which usually requires one.

Performance and payment bonds

Guarantees the job is completed and that subcontractors and suppliers are paid.

Without it — The contract cannot be awarded.

Business service bonds

Covers theft by your employees from a customer’s home or premises: the bond cleaners, caregivers, contractors and maintenance firms are asked for by name.

Without it — A customer who is stolen from by your staff has no recourse against you but the argument, and most service contracts now require the bond before the first visit.

Employee dishonesty bonds

Covers theft of your OWN money, stock or property by your own employees, including embezzlement.

Without it — The commonest large theft a small business suffers is internal, and no property or liability policy responds to it.

What is a business service bond, and how big does it need to be?

It is the bond a customer asks for before they will let your people into their house or their building: cleaning companies, home care, maintenance, pest control, contractors doing interior work. It covers theft of the customer’s property by your employees, which is exactly the fear the person hiring you has. Limits usually start around $5,000 and run up to $100,000 or so, and the customary purchase for a small firm is $10,000 to $25,000.

How is an employee dishonesty bond different?

Direction of the theft. A business service bond protects your customer from your employees; an employee dishonesty bond protects YOU from them. That covers cash taken from the register, stock walking out of the warehouse, a bookkeeper writing checks to themselves, payroll manipulation and fake vendors.

Why does the bond company want my personal financials?

Because a bond is closer to credit than to insurance. The surety is not accepting your risk, it is guaranteeing your performance and expecting to be reimbursed if it pays, so it underwrites your balance sheet, your working capital and usually a personal indemnity from the owners. That is also why bonding capacity grows with your financial statements rather than with your premium.

Does my credit score really change the price?

On a lot of bonds it is the single biggest factor, and this is the part that catches people out. Because the surety expects to be reimbursed for anything it pays, it is asking the same question a lender asks: can this person make us whole? So on smaller license and permit bonds the rate is driven largely off the owner’s personal credit, and the spread is not subtle — strong credit can buy the same bond for a small fraction of what weak credit pays, and below a certain point the market either declines it or asks for collateral or a funds-control arrangement.

What does it cost?

License bonds are typically a flat annual figure on a modest penal sum, and on those the price is mostly a function of credit. Contract bonds are priced as a percentage of the contract value, commonly around 1-3%, improving as your financials and track record strengthen. Business service and employee dishonesty bonds are among the cheapest things a small business buys, often a few hundred dollars a year at working limits. A poor credit history raises any of them sharply or brings a collateral requirement.