How Much Does a $30,000 Surety Bond Cost?
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As a business owner, you likely have to keep track of multiple requirements that cover your industry, including obtaining permits, a license, and others so that you can lawfully operate your company. Many licenses for business owners also have bond requirements.
For example, auto dealers must obtain motor vehicle dealer bonds before they can secure dealer licenses to transact in cars. Licensing and bonding are common requirements for many different types of businesses. If you have to purchase a $30,000 surety bond to secure your license, you might think the cost is prohibitive.
However, you will not be required to post the total bond amount to get bonded. Here is some information about surety bond costs for a $30,000 surety bond.
How a Bond Pricing Is Calculated
The surety bond cost for a $30,000 surety bond is not the total amount of the bond. Instead, the bond cost is a percentage of the bond's maximum amount. The face value of a bond is called the penal sum, and it is the most the surety company might have to pay when a valid bond claim is filed.
However, if your bond company pays a claim filed against your bond, you will be required to reimburse the surety in full based on an indemnity agreement you will have to sign when your bond is issued to you.
The bonding process will be initiated when you submit your online application and supporting documents to a bond company or insurance company. The bond company will send your application through the underwriting process so it can determine your level of risk.
Surety companies evaluate the credit history, finances, and character of applicants. If your credit report shows that you have good credit, the surety company will likely believe you are a lower risk. By contrast, if you have poor credit, the surety company will likely believe that you are a higher risk. You will have to pay a higher surety bond amount if you are assessed at a higher level of risk.
The underwriting process will include a credit check and an assessment of your business's finances. Both your business and personal credit score will be important. As a part of the process, the company will want information about your business, including its working capital, business name and phone number, organizational structure, key stakeholders, bank account information, tax information, and people with whom you've previously done business.
If the surety decides to approve your application, it will give you a free quote of the surety bond premium. The premium is what you will have to pay to secure the bond and is a percentage of the bond's maximum amount. The bond premium quote will be a low percentage if you have good credit and a higher percentage of the bond amount if your credit is spotty or poor.
While other factors are also important, your credit score will have an important role in the quote you might receive. If you have a high score, your bond quote might be as little as 0.75% to 1.5%. For a $30,000 bond, this would be a range of $225 to $450.
Here are some ballpark estimates of the potential surety bond rates at different credit score ranges:
- 700 + - $225 to $450 (0.75% - 1.5%)
- 650 to 699 - $300 to $750 (1% - 2.5%)
- 600 to 649 - $750 to $1,500 (2.5% - 5%)
- 599 and below - $1,500 to $3,000 (5% - 10%)
These are only estimates. Your bond cost will depend on the factors considered during underwriting. To find out how much you might have to pay for a $30,000 surety bond, submit your online application to obtain a free quote. If your bond application is approved, the bond company will provide you with a bond form to give to the state showing that you are bonded.
How to Get a $30,000 Surety Bond With Bad Credit
If you have bad credit, you can still get a surety bond by going through your bond company's bad credit program. You might be asked to provide additional information to the surety company so that it can verify you have enough capital to cover potential claims and operate your business.
A bad credit surety bond will come with a higher bond premium. Make sure you have enough money set aside to purchase it. Once you are bonded, take steps to improve your credit and avoid bond claims by paying your bills on time and following the laws governing your industry. If you can increase your credit score, you might secure better bond rates in the future.
Most Common $30,000 Surety Bonds
Your bond cost will also depend on the bond type and the location in which you intend to do business. Some states might require a $30,000 surety bond for certain businesses while others might require bonds in a higher or lower amount. Some common types of surety bonds that might require you to post a $30,000 total bond amount include the following:
- Auto dealer bonds
- Health club bonds
- Farm labor contractor bonds
A $30,000 surety bond will not cost you $30,000. Instead, you will only have to pay a small percentage of the bond amount upfront to obtain your bond. Once you are bonded, work to build your credit and follow the law to avoid bond claims and secure more favorable rates in the future.