How Do Surety Bonds Protect Construction Clients?

At one time, the ability of a group of handymen to form a construction company and then low bid a new project in order to undercut existing firms was a great opportunity. However, business clients often learned the costs of choosing a low bid contractor without checking the contractor’s ability for fulfillment. At the least, such clients could generally expect delays as the newly-formed company learned the ropes. Surety bonds in Pennsylvania help protect against these types of delays.


Construction Delays Can Mean Unplanned Business Costs


Many businesses cannot afford the costs associated with delayed construction. At the least, they would have to report delays to their own financial backers. Non-performance on the part of the construction company can mean serious consequences to the client.


In addition, one of the most important things a new company must learn is proper cash flow management. In the absence of a healthy cash flow, the construction company has a very real chance of defaulting completely, leaving the client to start over from scratch.


Sureties Protect the Clients


Construction companies cannot always guarantee their performance, but a large insurance firm with deep resources can make the guarantee to clients. Construction firms pay an annual premium to a provider of surety bonds in Pennsylvania, and their clients are reimbursed in the event of any performance delay. This protects clients and gives construction firms a strong guarantee of contractual compliance.