Bid Bond

If you own a construction company and are bidding for a large project, you might be required to put up what's called a bid bond. This debt instrument makes sure that you will follow through on your bid if you happen to win the job.

Think about it like putting up a bond when you're bailed out of jail. If you run away before your trial date, the court will keep the bond. You're out the money that went into the bond. It's a way to guarantee you'll...show up.

The bid bond has the same basic function. Instead of just throwing out nonsense bids and wasting people's time, the bid bond ensures that your bid is accurate, and that you will move ahead with the project if you win the contract.