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Property Casualty

Make a Smart Substitution With Surety Bonds

How do surety bonds benefit your business, even if you aren’t in construction? Holmes Murphy Client Executive, Surety Tim McCulloh explains in this article.
Tim McCulloh
Tim McCulloh
Client Executive, Surety

At its core, a surety bond is a guarantee of a future contractual obligation. As a leader in the construction space, our team helps contractors get performance and payment bonds on a regular basis around the country. In addition to bonds in construction, we’re seeing an increasing number of contractual obligations unrelated to construction.

These non-construction bonds can be in any industry where a future service is promised via a contract or agreement. From technology and janitorial services, power purchase agreements and solar work, and even future tax obligations and appeal bonds in the courts, many of these future obligations can be secured by a letter of credit from a bank or another bank product – but did you know surety bonds can also be used as a guarantee?

Surety Bonds Benefits for Your Unique Needs

We’ve substituted surety bonds for the traditional bank letter of credit for a variety of obligations, including:

  • Performance obligations
  • Workers’ compensation self-insurer obligations
  • Security to support an appeal of a court decision
  • Utility payment security
  • Environmental cleanup obligations

As bank and insurance markets ebb and flow, substituting a surety bond for your contractual obligations instead of a letter of credit can offer several benefits.


The use of a surety bond will not take up capacity in your company’s credit facility.


Unlike letters of credits, surety bonds generally do not require a company to maintain specific levels of financial ratios.


Surety bonds often offer more security than a letter of credit, and most surety bonds do not have “on demand” language. The absence of this language allows the surety and principal to defend a situation where a claim to submitted against the bond.


Letter of credit rates generally correlate to the strength or weakness of the macro economy plus a utilization fee. Bonding rates tend to be more stable and in line with a client’s historical success.

Work With an Expert to Choose the Right Bond

If you’re preparing to enter an agreement where your company is guaranteeing future performance or payment, a surety bond may be the right choice for you to guarantee the obligation. Ensuring you receive surety support is crucial for your success.

Working with a team that knows the current challenges and trends in the surety and construction industries means you’ll have the insight you need to obtain the necessary surety programs that will secure your business. Ready to learn more about your surety bond options? Reach out today and let’s get started!

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