With surety bonds, collateral is typically used for protecting the surety bond company from a possible loss. Here, you can learn about the collateral used for surety bonds, along with some pros and cons of each.
Funds control is a term used in surety bonding and can also be called funds administration or just escrow. It usually involves a third party handling the contract proceeds to process payments for bonded contractor. The idea is very similar to a construction loan on the residential side. The process typically looks something like this:
Often business must make a choice between surety bonds or letters of credit to guarantee their obligations. While there are some similarities between letters of credit (also called an Irrevocable Line of Credit or ILOCs) and surety bonds, there are also serious differences between them. Businesses should understand these differences so they can make betters choices. […]