Securing your bond with expertise and efficiency.

Contractors are often required by clients to be bonded, particularly for government projects but private clients may also stipulate that all contractors have bonds. Although most common in construction, bonds may also be required in manufacturing and other industries.

If you’re looking to win a project bid, having bonds for the tendering stage may make you a more appealing, trustworthy candidate. As bonds are designed to protect the potential client (it’s essentially insurance for your customer), it gives them peace of mind.

While both are forms of financial guarantees, they are not the same and a letter of credit should not replace a surety bond:

• A letter of credit is issued by a bank and is used to guarantee payment for a specified amount under the contract. 
• A surety bond is issued by an insurance provider to guarantee fulfillment of obligations under the contract.

In the case of a construction project, if the contractor defaults, the bond provider takes the steps required to complete the project (e.g. provide the contractor with financial support, select a new contractor, take over the project from the contractor, provide support for the project owner to select a new contractor).

It depends on the surety bond and the exact terms under your agreement, but most bonds will expire around a year after the date of being issued. However, the duration can vary. Some payment bonds may last up to two years, and other types of surety bonds can last even longer. Moreover, some bonds have the option to be renewed, whereas others will be classed as “non-renewable.”

Companies that are considered “bonded” have been deemed as trustworthy by the underwriting service (i.e., surety bond issuer). This is attractive to potential clients as it shows you have the ability to recoup if there is a loss and work is guaranteed.

Note that the Canadian government will set forth certain requirements and regulations for contractors, subcontractors, and companies, depending on the type of work being done and the industry. There may be criminal background checks, credit history checks, and so on. The bond applicant must provide the issuing company with all the required data to verify their creditworthiness and other stats.

The following are types of operations where licence and permit bonds are required:

• Gas contractors
• Mine operations/environmental remediation
• Roofing contractors
• Collection agencies
• Consumer protection
• Direct sellers
• Grain dealers
• Hazardous waste transport licencing
• Electrical contractors
• Contractors’ licencing and permitting
• Real estate and mortgage brokers
• Highway transportation
• Motor vehicle dealers
• Private investigators
• Road cut bonds
• Livestock dealers

* There may be other areas where security is required and a bond can be posted.

Types of activities and taxes covered may include::

• Cannabis tax bond (for licensing)
• Bonded carrier operations
• Customs bonded warehouse
• Customs broker license
• Customs sufferance warehouse
• Fuel tax
• Non-resident GST
• Brewer, spirits, distiller/wine, or tobacco tax
• Duty-free shops
• Release of goods
• Temporary importation
• US customs for imported goods/operations
• Sales tax
• Air, highway, marine, or rail carrier tax

The bond guarantees that the issuer of the replacement security will not suffer a financial loss as a result of a duplicate instrument being issued. Examples of lost document bonds include: 

• Fixed penalty 
• Open penalty 
• Waiver of probate 

It also serves as a guarantee that if the lost instrument is found in the future, it will be returned to the surety writing the bond for proper disposal so that no future economic loss from this instrument can occur.