License Bonds, Permit Bonds and Miscellaneous Guarantee Bonds are a type of surety bond, sometimes referred to as commercial bonds or simply license bonds. These license and permit bonds are required by government agencies as a pre-licensing requirement for a number of different businesses.
A license and permit bond guarantees that a business will operate in accordance with federal, state, or local laws and regulations. Each license bond is specific to one industry, and protects customers and/or the state from damages. Most commonly, license bonds protect governments and consumers from fraudulent practices committed by the business that is bonded. In any industry that requires bonding, each business must be licensed and bonded before they are allowed to legally operate.
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FAQs About License Bonds
Even though a bond protects consumers and governments from unlawful businesses, it can also help business owners make their companies look more professional and responsible.
A license bond, generally speaking, reimburses clients or governments if you don’t comply with certain standards or regulations. Most government agencies require businesses to have license and permit bonds before licensing.
Have you been asking yourself “What is a permit bond?” You’ve come to the right place. This section covers what you should know about license bonds, including whether you need one, which types you can get, and other details you may want to keep in mind.
How Do I Know If I Need License and Permit Bonds?
Most of the time, you’ll need a permit surety bond before starting a business project. Whether you need permit surety bonds or not depends on the state and your profession.
If you’re a contractor, for example, you’ll need a contractor license bond before you start working. Insurance brokers, on the other hand, would have to get an insurance broker bond. The list goes on.
Bonds are also required to perform certain types of projects, such as altering landscapes or applying pesticides.
Generally, you’ll need your business or work to be licensed, bonded, and insured. Even though many people think bonds and insurance policies are the same, there’s a slight difference. Here’s an overview of the three factors so that you have a better idea of what they involve:
- Bond: It reimburses clients for any financial losses that come from faulty business practices.
- License: It allows you to perform your work legally in certain states and areas.
- Insurance: It pays for unexpected expenses involving legal costs, medical bills, property damage, etc.
The best way to know if you need permit bonds is to check your local laws. Once you get the right one for your industry, you guarantee that your business will meet all the guidelines and rules set by a contract.
If your business doesn’t meet these guidelines, the bond will pay for any losses. However, you’ll be responsible for paying that amount back to the surety.
How Does a License or Permit Bond Protect Me?
As mentioned, bonds protect consumers. However, if you look at it from another perspective, a bond can also prevent your business from losing potential clients.
Surety bonds may protect you when you fail to:
- Obey the law
- Comply with safety regulations and/or building codes
- Meet professional quality standards
A great benefit of bonds is that they reassure customers. Even if you’re not legally required to have a bond, you should still consider it. Bonds can help you attract clients because they play a huge role in risk management.
The more protection you provide to your clients, the more likely they’ll choose you over other “unbonded” competitors.
How Much Does a Permit Bond Cost?
It depends on the type of bond you get. Sometimes, your bond can cost 1%-3% of the required bond amount.
You may be able to issue your bond instantly and without underwriting. However, specific bonds may have to be reviewed before determining the cost. Another factor that could influence how much you’ll pay for your bond is your current credit score. The better it is, the lower your premium could be.
Which Businesses Need a License and Permit Bond?
Permit bonds are needed for plenty of industries. Some common businesses that need to issue this type of bond include:
- Cleaning Companies
- Insurance Professionals
- Landscaping Businesses
- Auto Dealers
Which Type of Bond Do I Need?
It depends on the type of profession or business you have. You can talk to our company for more information.
The most common license and permit bonds include:
- Auto Dealer Bonds
- Contractor License Bonds
- Health Club Bonds
- Mortgage Broker Bonds
- Freight Broker Bonds
- Insurance Broker/Adjuster Bonds
- Liquor License Bonds
- Professional License Bonds
- Travel Agency Bonds
How Do I Get Started?
Even if you don’t need to get a bond, remember it can save you from many headaches in the future.
To get started with our team, all you have to do is fill out our online application. It doesn’t take more than a minute. You can also call us at 1-818-715-7133 for more information about our services.
What Happens If You Don't Get a License Bond?
Working without a license bond could make you face severe consequences, including fines and even jail time.
On the other hand, if you’re not required to have a commercial bond, and you don’t get it, your business will not look as legitimate to your potential customers. This can lead to fewer clients, and therefore, less money.
In any case, the best thing you can do for your business is to issue a license and permit bond even if you’re not legally required to do it. Several of your competitors may be doing it, so they’d have an advantage over you.
Having commercial bonds protects your customers and makes them more likely to trust you, so don’t hesitate to ask for more information about it.
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