tackling trouble areas Surety Bonds Provide By: Chris Birk Peace Of Mind The term “licensed and bonded” should be commonplace in your advertising. T The economic volatility of the last 18 months has consumers clamoring for new layers of protection. That desire is fueling an uptick in the interest in surety bonds that cover both cleaning companies and their customers. Bonds have long played an integral role in the growth and success of cleaning and maintenance firms nationwide. While not uniformly mandatory, these risk-mitigation tools are essential for most projects involving taxpayer dollars. But, private companies and individual consumers are starting to take greater notice. The phrase “licensed and bonded” has long been a staple of advertisements, busi-ness cards and other marketing avenues for service-related companies — cleaning companies included. On the heels of the subprime mortgage collapse and a series of high-profile accounting and financial scandals, con-sumers in general are increasingly on the lookout for protection and potential avenues of relief. “This past year has seemed to be especially active statutorily and even with regulation in terms of requiring or introducing new bond requirements,” said Rob Duke, director of underwriting and assistant counsel for the Surety & Fidelity Association of America. “In this environ-ment, there may be a call for greater over-sight and greater consumer protections, and a bond can play a role in that.” Surety bonds aren’t a foreign concept to most long-time cleaning and maintenance executives. But, they can prove a curiosity to new and emerging companies. Surety Bonds Breakdown In essence, these are three-party agree-ments between a principal — the entity performing the work — the obligee — the party protected from loss by the bond — and the surety issuing the bond. Surety bonds help guarantee that a con-tract and all applicable laws and regula-tions are followed. They also provide consumers, organiza-tions and the state or municipality with a way to recoup funds in the face of illicit, ille-gal or otherwise detrimental activity on the part of the bondholder. Cleaning and maintenance companies entrust their workers with significant respon-sibility — as do their clients, who open their homes and businesses to strangers. There’s an entire suite of surety bonds that can provide fiscal protection for both cleaning companies and their consumers. For example, fidelity bonds such as employee dishonesty bonds and janitorial services bonds can help insulate compa-nies against losses incurred by renegade employees. In most settings, bond claims are only paid out upon conviction. These specific surety bonds can also serve as a competitive advantage in an increasingly crowded marketplace. While their inherent value can be debated by cleaning and maintenance insiders, con-sumers continue to latch onto protections and guarantees that are truly enforceable. Obtaining surety bonds is typically a streamlined and straightforward process. Cleaning service and industry bonds are generally low-cost ventures with a relative-ly low risk for sureties. A surety company will likely take a look at an applicant’s finances, credit history and overall company status. But, in most cases, these types of bonds can be processed the same day. Coverage amounts usually vary from $5,000 to $100,000, with the span of cover-age anywhere from one to three years. In real dollars, bond premiums for a $5,000 bond that covers five or fewer work-ers might cost as little as $100 per year. A surety bond acts as an insurance failsafe in the event that your customer’s equipment becomes damaged or a theft occurs while you are servicing an account 42 CM/Cleaning & Maintenance Management ® • May 2010 Image courtesy of U.S. Products
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