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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Surety Bond

Definition:

Remember when you were a kid at summer camp and had to pony up a buck to prove your heavy roller status at Friday night's poker game?

Surety bonds are kind of like that.

We repeat: kind of.

A surety bond is an agreement between three parties. One party guarantees that second party will fulfill a promise to the third party.

For example, one signer might guarantee that a small business will honor a government contract. If the small business doesn't meet the contract, the person who signed on may have to pay up.