This is a very popular question of new applicants; but what they do not know is just how hard this can be to “ballpark”. Surety Bond premiums very based on several factors. In general, those applying for a commercial bond will fall into two approval categories: the standard surety bond market, and a high-risk market. Depending on which market you fall in will vary greatly your surety bond cost.
Standard Market Surety Bond Cost
The standard markets for surety bonds are reserved for those with good personal credit, including strong business and personal financials. Any company that cannot provide business financials (new companies) will have to submit resumes of management that show solid industry experience. A rough estimate of the standard market surety bond cost, or premium, would be 1%-4% of the required bonds amount. Please remember that this is a broad range because bonds are underwritten on a case-by-case basis, and therefore premiums can be affected by several factors including your business type and what state you are operating in.
High Risk Surety Bond Costs
The bad credit surety bond market is available for those with poor, or no credit. This program allows these high-risk individuals to be approved by charging a higher premium then the standard market. Applicants with poor credit (a loose rule of thumb is below a 650), bankruptcies, tax liens, unpaid collection, or civil judgments can expect to be placed in the high-risk program. Once again these are very loose guidelines as every applicant is taken on a case-by-case basis. The cost of a high-risk surety bond will typically vary between 5%-15%, though in rare cases some premiums are as high as 20%.