Glossary of Business Credit Terms

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Commercial Surety Bond

What is a Commercial Surety Bond?

Commercial surety bonds are the type of bonds that are mandated by government agencies to provide protection to public interests. In this case, the government agencies require that the companies of a specific sector get a commercial surety bond for licensing. For these bonds, the public is the obligee.

How Does Commercial Surety Bond Work?

Consider an example wherein a commercial project is under construction with a general contractor on the job. The contractor needs to get a contract surety bond. This bond will protect the project owner if the contractor fails to complete the specificities of the contract.

In case of failure, the project owner has the right to file a claim against the bond. The financial damages will then have to be paid by a surety bond company. The contractor will then have to repay the amount to the bond company.

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