Supply Bond
Supply Bond Information
A supply bond, a type of contract bond, guarantees the supplier will furnish supplies or materials as contracted. Should the supplier default, the surety will underwrite the purchaser of the supplies against any loss. The supply bond is required by the project owner or state or federal law to secure public construction projects. There are no special markets (bad credit) for this, or any contract bonds.
As with all contract bonds, supply bonds are reviewed in a conservative manner; meaning new companies will have to start off with smaller contracts and work their way up to larger ones, all while building up your companies equity.
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Three party agreement
Surety Bond Definition: The definition of a surety bond is as follows: A surety bond is a binding agreement between three parties. This agreement sets forth a financial guarantee by one party ( “surety” ) to another party ( “obligee” ) that a third party ( “principal” ) will fulfill required obligations to the obligee, and that state, federal, and local laws and applicable regulations will be adhered to. Let’s examine each of the three parties.
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