Finance: What is a Surety Bond?

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

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Transcript

00:20

pay more than that if you lost more than your

00:22

buck Well surety bonds air kind of like that We

00:25

repeat kind of a surety bond is an agreement between

00:28

three parties One party guarantees that a second party will

00:32

fulfil a promise to the third party For example one

00:35

signer might guarantee that a small business will honor a

00:39

government contract That is that small business will have to

00:42

go borrow a whole bunch of money to go build

00:44

a bunch of fence wire stuff for the government that

00:46

they would need somewhere in the south And then some

00:49

bigger contractor would guarantee that that small business will in

00:54

fact perform on the contract If the small business doesn't

00:57

perform the contract like as guaranteed building whatever fencing materials

01:02

and the government wanted to build will the person who

01:04

signed on their behalf would likely have to either pay

01:07

up or build the fence themselves The big guy i

01:09

either guarantor gives the little guy the principal surety in

01:15

delivering the contract to whoever wants it toe happen A

01:18

k a The oblige g remember that song about the

01:22

government there yet oblige E ope elijah Life goes on

01:26

Sorry we're done anyway all the parties involved bond with

01:30

certainty the delivery of whatever product or service that surety

01:34

bond is standing behind So yeah that's what it is 00:01:36.669 --> [endTime] And don't call us surety