SURETY BOND

A performance bond is a type of surety bond that provides financial assurance to project owners (obligees) if a contractor (principal) fails to fulfill their contractual obligations. The performance bond guarantees that if the contractor fails to complete the contract, or fails to put forth a good-faith effort in doing so, they will be financially responsible for the costs of completing the project... To secure a performance bond, companies must first be approved by a surety bond company. The contractor must provide financial documentation, such as tax returns and balance sheets, to establish their creditworthiness. After approval, the company will request a bid bond from the contractor to guarantee that they will submit a formal bid for the project. Upon successful bidding, the contractor will then be issued a performance bond.