Business owners must ensure they comply with the laws and regulations governing the industries in which they operate. Many different types of businesses are required to secure licenses from the state or permits from their local governments to lawfully conduct their operations.

For example, if you are an auto dealer, you likely have to get a dealer license and a motor vehicle dealer bond to get your license before you can legally buy and sell cars. Many types of business licenses include bond requirements before they will be issued.

If you have learned that you need to purchase a $35,000 surety bond, you might wonder how you will come up with the money. However, you will not have to pay the total bond amount to obtain your bond. Here is what you need to know about surety bond costs and how they are calculated.

How Are Surety Bond Premiums Determined?

While you might be required to purchase a bond with a $35,000 surety bond amount, the surety bond cost you will have to pay will be significantly lower. The face value of a surety bond is known as the penal sum and is the maximum bond amount the surety company will have to pay if a claim is filed against your bond.

Instead, during the bonding process, the bond company will conduct underwriting to evaluate your level of risk. Surety companies want to ensure that you have a good credit history, good business and personal credit scores, sufficient working capital, and a good reputation in the community.

If a credit report reveals that you have good credit, the surety company will likely find that your level of risk is low. However, if you have poor credit, you will be assessed as having a higher risk. The higher your risk, the more you will have to pay to purchase a surety bond.

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To determine whether to underwrite your bond, the surety company will review your application and the supporting documents you submit. It will want to conduct a credit check and evaluate your company's financials. You will need to include the contact details of your business, including its name and phone number.

You will also need to submit banking information, your business's organizational structure, and letters of reference. Following underwriting, the surety company will give you a free quote on the surety bond premium. The bond premium is the percentage of the total amount of the bond and is what you will need to pay to obtain it.

You can apply for a surety bond through a bond company or an insurance company. Once your risk has been assessed, the surety bond rates you might be quoted will vary based on your credit score and other factors. If you accept the quote and pay the bond premium, you will then have to sign an indemnity agreement to hold the surety company harmless in case a bond claim is filed.

The indemnity agreement is a legally enforceable contract through which you will agree to pay the surety company any amounts it might have to pay on your behalf for a valid bond claim.

If you have good business and personal credit and a high credit score, your bond quote might be as low as 0.75% to 1.5% of the face value of your bond. This would mean paying from $262.50 to $525 for a $35,000 bond.

If you know your credit score, here is a ballpark estimate of what you might expect to pay for your bond price based on different score ranges:

  • 700 or higher - $262.50 to $525
  • 650 to 699 - $350 to $875
  • 600 to 649 - $875 to $1,750
  • 599 and below - $1,750 to $3,500

These are only general ranges. The bond cost you might have to pay will depend on your level of risk and other underwriting factors. To get a better idea of your bond cost, you can submit an online application to receive a free quote. If you obtain a bond, you will be given a bond form to submit to the party requiring you to be bonded.

How to Get a $35,000 Surety Bond With Bad Credit

If you have bad credit, you might find it more difficult to obtain a surety bond. Many bond companies refuse to underwrite bonds for individuals with poor credit. While the process might be harder, that doesn't mean you won't be approved, however.

You can obtain a bond through a bad credit program. The bond company may ask for additional documents to verify that you have sufficient capital to operate your business and cover potential losses.

You can expect to pay a higher bond premium for a bad credit surety bond. Set aside the money you might need to secure the bond. After you are bonded, work on increasing your credit score by paying your bills on time. You should also try to avoid claims against your bond. If your credit has improved when it's time to apply for a new bond, you might end up receiving a more attractive bond quote.

Most Common $35,000 Surety Bonds

Bond costs vary from state to state and even from city to city. This means that your surety bond cost will depend on where you do business. Some of the types of surety bonds that might require a $35,000 total bond amount include the following:

Auto Dealer Bond: New auto dealers in Vermont are required to post a $35,000 bond.

Collection Agency Bond: The Division of Banking at Department of Financial Institutions in Wisconsin requires applicants who do not maintain all records within the state to obtain a $35,000 surety bond so they can operate as a collection agency in the state.

Some bonds may be required in lower amounts in some states. Some types of bonds, including freight broker bonds, have much higher total bond requirements.

Having to purchase a $35,000 surety bond is not as expensive as you might think. Instead of paying $35,000 for the bond, you will instead pay a small percentage based on the factors considered during the underwriting process. Make sure to follow the law and maintain a good credit score to obtain the best rates in the future.