Do you know what a surety bond is and who’s eligible to apply for one? In this article, we’ll attempt to answer these questions as simply as possible.
In lay terms, a surety bond is a guarantee that a beneficiary will receive a service. For instance, if a company takes on a major project where the costs associated with missing a deadline or failing to complete the project would be more than the value of the company itself, it can ask an insurer to issue a surety bond providing the beneficiary with a guarantee that the project will be completed. Bonding can also be useful in cases where a company has a file with the Office de protection du consommateur.
Commercial surety bonding:
A commercial surety bond encompasses different types of guarantees, including licences, permits, and an array of other elements that we’ll cover below (spoiler alert!).
- A permit bond protects clients if a business goes bankrupt, if it shuts down, or if a collection agency intervenes mid-contract. This type of surety bond is typically offered to businesses such as fitness centres, dealerships (cars, RVs, etc.), and recycling companies.[1]
- A licence bond is required by general contractors. It provides clients with a guarantee that the work they have contractually requested will be carried out. This bond is intended to protect and compensate unsatisfied clients, namely in situations where the work is either not carried out or only carried out partially, or in the event of latent defects or deficiencies in the year following the completion of the work.[2]
- Customs and excise bonds can be useful for businesses that sell goods. These types of bonds serve as a guarantee that all duties and taxes have been paid to the governments of the countries or provinces where the applicant’s goods are to be distributed. A customs bond guarantees that all fees related to sending a product across the Canadian border have been paid, whereas an excise bond guarantees that all levies on certain types of government-regulated products (e.g., tobacco, alcohol, or gasoline) have been paid.[3]
- CNESST surety bonds are useful for employment agencies, which must make sure to have the right bond depending on their industry.
The world of bonding can be difficult to navigate, but our specialists have the expertise to help you with your project. Don’t hesitate to contact us if you have any questions!
[1] Office de la protection du consommateur: Commerçants et recycleurs de véhicules routiers – Fournir un cautionnement
[2] Régie du bâtiment du Québec: cautionnement
[3] Association canadienne de caution: CAUTIONNEMENTS DE DOUANES ET ACCISE
