# Performance Bond



## amgraton (Jul 26, 2010)

Does anyone know about self bonding for performance bonds. I am a small contractor in NH.


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## Kgmz (Feb 9, 2007)

Yes, what do you need to know.

How much of a bond do you need?

Do you have the cash liquid or is it tied up?


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## amgraton (Jul 26, 2010)

*Performance bond*

Hi

The job will be approximately one million construction cost. Yes, we can come up with cash.

Thanks
Meg


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## DBBII (Aug 28, 2008)

A long time ago, I had this same question. The Owner wanted an Irrivocable Letter of Credit for the amount of the contract. While my bank would do this, they wanted to know where the total amount of the money was. They weren't really going to "lend" the money. The biggest problem with this is how do you determine default on a contract? Depending on who writes the contract, default can be something like missing a milestone in a schedule. Forget the fact that maybe you had a hurricane -- the owner can say "you missed this deadline. Pay" Your bank is not your friend. If you have the cash, why don't you just get a real performance bond? A GOOD agent can probably get you one in a week or so if you have sufficient financial and business paperwork.


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## CLWord77 (Aug 25, 2009)

It's not really "Self-bonding", but posting another security in lieu of bond. This is usually in the form of a letter of credit or cash. The advantage is that you don't pay for a bond. The disadvantage is that capital, whether cash or available credit, is tied up in the process.

Plus, in the event of a claim situation it's a bigger fight for someone to try and claim on a bond. If there's simply a deposit in lieu of bond, it's you and your lawyers vs. them and their lawyers. With a bond, not only would they be fighting you and your lawyers, but the bond company's claim investigators and lawyers as well. They don't generally like to pay out claims, because then they have to try and collect from you later.

Nowadays, not a lot of contractors have the capital they can tie up, so they pay for a bond. It is basically service fees for the financial backing of the surety company.


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