Get Your Business Bonded

Discover whether your business needs to meet bonding requirements to operate legally in the city. This guide helps you understand bonding obligations, ensuring compliance and protecting both your business and clients. Learn the steps, regulations, and how to determine if bonding is necessary for your specific business type by getting in touch with a bonding agent.

What is a Bonding Agent?

A Bonding Agent can help your business to obtain a bond from a Surety Company. The Bonding Agent helps evaluate your business and pre-approves your business for an appropriate bond amount. You must work with a licensed Michigan Bonding Agent in order to obtain a bond for your business.

How do I find a Bonding Agent?

• There are various ways to find licensed Bonding Agents. If your business is well-established, you will likely not have any trouble finding an agent willing to work with you. However, if your business is newer, you may need to contact a number of different bonding agents or work with the U.S. Small Business Administration or community partners in the library (hyperlink library) to find an appropriate match.
• The National Association of Surety Bonding Professionals maintains a nationwide directory of bonding agents.
• The U.S. Small Business Administration also has a directory of bonding agents that are approved to issue bonds backed by the federal government. These bonding agents can be helpful for newer businesses.

How do I obtain a surety bond?

Once you have found a Bonding Agent, you’ll work with them to get preapproved for a surety bond for your business. The process is similar to the process you would follow to get a business loan. The Bonding Agent will ask for information about the legal structure of your business, finances, ownership structure and professional references. This information allows both the Bonding Agent and the Surety Company to evaluate the reliability and trustworthiness of your business.

How long will it take to obtain a surety bond?

The length of time it takes to obtain a surety bond depends on the specifics of your business and how quickly you can provide the Bonding Agent with the information they need. Occasionally, the Agent will discover information about your business that may negatively impact your ability to obtain a bond. However, a good Bonding Agent should be able to identify these issues early. Generally speaking, the process can take anywhere from a few days to a few months. The process to obtain a surety bond should begin as soon as your business decides to bid.

How much does it cost to obtain a surety bond?

Getting preapproved for bonding should not typically cost anything. However, once you identify a specific project to bid on, you will need to pay a premium to actually obtain a bond. The bond premium is a percentage of the total bond value. This can range from 1% to 15% depending on various factors, including your business’s financial health and the nature of the project.

What is a Bid Bond?

• A Bid Bond is a kind of surety bond that is submitted along with your bid response. The Municipal Code requires that all bid amounts of $20,000 or more be accompanied by a Bid Bond, or an acceptable substitute per OMC Sec. 10-103, such as a cashier’s check, an official bank check, or a certified check from a Michigan or nationally chartered bank . These bonds or substitutes are typically 5% of the bid amount, unless otherwise specified, and must be submitted at the time you submit your bid. Be sure to check the specific bonding requirements of your project.
• If your bid is unsuccessful, the City will return your check promptly after the bid period has closed, if a check was submitted.
• If your bid is successful, the City will retain your Bid Bond until the completion of the project and subsequent payment.
• Bid bonds are different from performance and payment bonds because they insure the project owner in the pre-project bidding process alone, while performance and payment bonds insure the project owner and other stakeholders/employees during the construction process itself.
• The process for obtaining a Bid Bond can be found in the Find a Bonding Agent and Get Your Business Bonded sections.

What is a Performance Bond?

A Performance Bond is a type of surety bond that helps the City guarantee the quality of your business’s work. The City of typically requires a Performance Bond for contracts that require performance over time, such as construction or service contracts. The process for obtaining a Performance Bond can be found in the Find a Bonding Agent and Get Your Business Bonded sections.

What is a Payment Bond?

A Payment Bond is a legal contract and financial guarantee that a surety company issues on behalf of a contractor to ensure that all parties involved in a project are paid. This includes subcontractors, suppliers, and employees. The process for obtaining a Payment Bond can be found in the Find a Bonding Agent and Get Your Business Bonded sections.

What is a Warranty Bond?

• A Warranty Bond is a financial guarantee made by a builder to protect the owner of a construction project from defects in materials or workmanship that might arise after the project is completed. A warranty bond is also sometimes called a maintenance bond.
• A Warranty Bond takes this guarantee one step further by creating a contractual obligation that makes the builder financially responsible for correcting any defects in the project for a warranty period specified in the contract.