Surety Bond Education

What is a Supply Bond?

A Supply Bond is a type of contract surety bond. Specifically it is used to guarantee a contract for supply of materials.  For example, a construction project may require purchase of components that are high-dollar, specialized, and/or critical to completion of the project.  A Supply bond could help manage the financial risk of not getting your delivery on time or at all.

Is a Supply Bond Different Than A Payment & Performance Bond?

Unlike a Performance bond, which would include labor exposure and execution of construction, a supply bond guarantees delivery of materials or equipment from point A to point B and receipt on a particular date specified in the contract.

When is a Supply Bond Used?

If you’re building a home, you probably wouldn’t ask the lumber yard down the road for a Supply bond on the lumber delivery.  However, we’ve seen some interesting cases such as use of a Supply Bond to guarantee delivery of turbines associated with construction of a hydroelectric dam.  You can imagine how critical it was to ensure delivery of this very expensive and critical equipment in a timely manner.  Of course there are many applications where a Supply bond can be a solid way to reduce risk.

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