How Much Does a $50,000 Surety Bond Cost?
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As a business owner, you likely have many requirements you must meet and expenses involved with operating your business. If you are required to get a license to operate your company in your state, it's likely that you will also be subject to bond requirements as a condition of getting a dealer license or other type of business license.
Based on your business's type, you might also need other types of contract bonds or commercial bonds. Here is some information about the cost of a $50,000 surety bond.
Calculating Surety Bond Costs
Many different types of businesses are required to get surety bonds. If you have learned that you have a $50,000 bond requirement, you might feel overwhelmed. However, you will not have to pay $50,000 to purchase a surety bond.
Instead, you can submit an online application to the bond company and it will review your credit history and other underwriting factors to determine your bond cost. The surety company or insurance company will provide you with a free quote for the surety bond premium that you will have to pay based on the results of your credit check and the underwriting process.
The surety bond rates vary based on the type of bond and your level of risk. For example, if your credit report reveals that you have bad credit, you can expect to pay a higher percentage of the total bond amount to obtain a bond because of your higher risk.
By contrast, if you have good credit and are considered to have great moral character, the surety company will likely determine you pose a lower risk and provide you with a quote for a lower rate.
The bond quote will be for the bond premium, which is how much you will have to pay up front. The total amount of the bond is called the penal sum. It is the maximum the surety company would have to pay for a valid bond claim.
Once you are approved for a bond, you will pay the quoted amount up-front and be asked to sign an indemnity agreement. This agreement will legally require you to reimburse the surety company for any valid claims it might pay for you.
Your surety bond cost will be determined by the underwriting and bonding process based on several factors, including both your business and personal credit scores. To evaluate your application, the bond company might need you to provide information about these things:
- Assets and working capital
- Your resume
- Projects you have completed
- Business address, phone number, and entity structure
- Bank accounts
- References from your bank and others with whom you have done business
If you have a great credit score and substantial business experience, your quote might be as little as 0.75% to 1.5%. For a $50,000 surety bond, this would equate to $375 to $750 to obtain your bond.
Some ballpark estimates of what you might have to pay for the bond price based on different credit score ranges include the following:
- 700 plus - 0.75% to 1.5% or from $375 to $750
- 650 to 699 - 1% to 2.5% or from $500 to $1,250
- 600 to 649 - 2.5% to 5% or from $1,250 to $2,500
- 599 and below - 5% to 10% or from $2,500 to $5,000
These are only general estimates. Your bond cost will depend on the company's evaluation of the different underwriting factors and your assessed level of risk. The surety company will want to make sure that you have a good credit history and enough funds to conduct business.
You can submit an online application to receive a free quote. If you are approved for a bond, you will be provided with a bond form to give to the state or other entity requiring your bond.
How to Get a $50,000 Surety Bond With Bad Credit
Many surety companies won't underwrite surety bonds for people with bad credit. However, having poor credit doesn't mean that you can't get a bond. You can get a bond by going through a bad credit program with your surety bond company.
The company might ask you to submit additional documentation to confirm that you have the means to cover any potential bond claim and to operate your business.
Applicants with credit issues often come with higher bond premiums. Make sure that you have sufficient funds set aside to pay the up-front cost. Once you receive your bond, take steps to improve your credit score. Abide by the laws and do what you can to avoid claims against your bond. If your credit score has increased, and you have avoided bond claims, you might receive a lower quote when it's time to renew your bond.
Most Common $50,000 Surety Bonds
The ability to pay a percentage of your $50,000 maximum bond amount instead of having to post the entire amount up-front is attractive. While some states and licensing agencies will let you post the entire cash amount, choosing to purchase a bond instead can allow you to use the rest of your money for operating expenses.
Common types of surety bonds for $50,000 include:
- Mortgage broker bonds
- Telemarketing bonds
- Commercial bonds
- DMEPOS bonds
- Auto dealer bonds
- Contractor license bonds
Many types of bonds require lower amounts, depending on your state. For example, motor vehicle dealer bonds, auto dealer bonds, notary public bonds, contractor license bonds, permit bonds, and court bonds might have a lower total bond amount requirement in some states while requiring higher amounts in others. Other bonds, including freight broker bonds, have higher bond requirements.
A $50,000 bond requirement is not as expensive as it might initially sound. Your surety bond cost will be determined during the underwriting process and will be significantly less than $50,000. After you receive your bond, make sure to protect or build your credit and maintain good relationships with your customers and bond company, so you can continue to qualify for the best rates.