Project bonds
Payment Bonds
Meet the owner requirement and give your subs and suppliers confidence they will be paid. Share the contract and we take it from there.
Fast approvals and straightforward guidance.
— Josh A., Los Angeles, CA
A payment bond is a surety bond that guarantees a contractor will pay the subcontractors, laborers, and suppliers who work on a project. If the contractor does not pay, unpaid parties can claim against the bond instead of the project owner.
You, the contractor, who promises to pay everyone on the job.
The project owner, who is protected from payment claims on the project.
The bond company that pays valid claims, then recovers the cost from you.
What a payment bond guarantees
The bond guarantees that people who supply labor, materials, or equipment to the project will be paid. If the contractor fails to pay, those parties file a claim against the bond.
It protects the owner from payment disputes that could disrupt the project, and it protects the people doing the work. Once a valid claim is paid, the surety recovers the cost from the contractor.
Why public projects require payment bonds
On private projects, unpaid parties can usually file a mechanics lien against the property. Liens generally cannot be placed on public property, so public owners require a payment bond instead. It gives claimants a remedy where a lien is not available.
Who can claim and how deadlines work
Claimants normally include subcontractors, laborers, and suppliers who worked directly for the contractor. Lower-tier parties can often claim too, if they give proper notice.
Notice and lawsuit deadlines are strict and vary. Under the federal Miller Act, a claimant who does not have a direct contract with the prime contractor must give written notice within 90 days of last furnishing labor or material and must sue within one year. State public works laws set their own deadlines.
Payment bond and performance bond together
Owners that require one almost always require both. Sureties usually issue them as a pair on a single application, with one combined premium. Our performance bond page covers the other half of the pair.
Who needs it
Who needs a payment bond
- Contractors on federal projects above the Miller Act threshold
- Prime contractors on state and local public works
- Contractors on private projects where the owner wants protection from liens and unpaid claims
- Subcontractors who must bond down the chain to a general contractor
How it works
How to get a payment bond
Share the contract
Send the project name, owner, contract value, and the payment bond form the owner requires.
Submit your financials
Provide a company financial statement and work-in-progress schedule. Smaller bonds can require less.
Underwriting review
An underwriter reviews the contractor and contract. Most reviews take one to three business days.
Sign, pay, and receive the bond
Sign the indemnity agreement and pay the premium. The executed bond is delivered for the owner.
Cost
What a payment bond costs
Payment bonds are usually included with the performance bond, so there is typically no separate charge. The performance bond is generally 3% of the bond amount. Final approval and pricing are subject to underwriting.
What underwriters review
- Contract price and project type
- Contractor credit and financial strength
- History of paying subcontractors and suppliers on time
- Whether it is combined with a performance bond
- Length of the project
What to have ready
- Contract and the owner bond form
- Company financial statement
- Work-in-progress and backlog schedule
- List of major subcontractors and suppliers, when requested
- Resume and list of completed projects
By state
Payment Bond requirements by state
Pick your state for the amounts, thresholds, and agencies that apply.
Related bonds
Performance Bond
Guarantees you will finish the project under the contract terms.
Bid Bond
Guarantees your bid. If you win and walk away, the owner is paid the difference.
Maintenance Bond
Covers defects in materials or workmanship after the project is finished.
Payment Bond questions
What is a payment bond?
A payment bond guarantees a contractor will pay subcontractors, laborers, and suppliers on a project. Unpaid parties can claim against the bond if the contractor does not pay.
How much does a payment bond cost?
Usually nothing extra. Payment bonds are normally included with the performance bond, which is generally 3% of the bond amount. Final approval and pricing are subject to underwriting.
Who is protected by a payment bond?
Subcontractors, laborers, and suppliers on the project, and the owner, who is protected from payment claims. It does not protect the contractor.
Why can I not file a lien on a public project?
Mechanics liens generally cannot attach to public property. A payment bond gives unpaid parties a claim to pursue in place of a lien.
How long do claimants have to file?
It depends on the law that applies. For federal Miller Act projects, parties without a direct contract with the prime contractor give notice within 90 days and sue within one year. State laws set their own deadlines.
Do I need a payment bond and a performance bond?
Usually yes. Public owners that require one normally require both, and sureties typically issue them together.
Can I get a payment bond without a long track record?
Yes, on smaller projects with solid personal credit. Larger bond amounts need financial statements and project experience.