Payment Surety Bonds

Your subs and suppliers get paid. Your job keeps moving.

Payment bonds are required on nearly all public construction and increasingly on private work. BF Bond has placed contract surety since 1949, and we write payment and performance bonds together as a matched pair.

The Basics

What is a payment bond?

A payment bond is a contract surety bond guaranteeing that you will pay the subcontractors, laborers, and material suppliers who work on your project. If you do not, they can claim against the bond and be paid from it, and the surety then seeks reimbursement from you.

The bond exists because of a gap in the law. On private property, an unpaid subcontractor can file a mechanic lien against the real estate to force payment. On public property that remedy does not exist, since you cannot lien a courthouse or a highway. The Miller Act on federal projects, and the Little Miller Act statutes the states enacted to mirror it, close that gap by requiring the prime contractor to furnish a payment bond that unpaid parties can claim against instead.

It almost always travels with a performance bond, each typically written at the full contract price. They protect different people: the payment bond protects those below you in the contracting chain, and the performance bond protects the owner above you. Underwriting looks at both together, because a contractor who cannot pay their suppliers usually cannot finish the work either.

Guarantees payment to subcontractors, laborers, and suppliers
Required on federal work under the Miller Act and on state and local work under Little Miller Acts
Usually written at 100 percent of the contract price
Issued alongside the performance bond as a matched pair

Payment bonds at a glance

Bond amount

Typically 100 percent of the contract price, matching the performance bond

Premium

Generally quoted as a single combined rate with the performance bond, usually 1 to 3 percent of the contract price on a sliding scale

Term

Runs through completion, with claim windows for unpaid parties set by statute after last work or last delivery

Who requires it

Federal, state, and municipal owners, plus private owners and general contractors bonding their subcontractors

Paired with

A performance bond, and usually a bid bond at the tender stage

Where They Are Required

When a payment bond applies

Anywhere lien rights are unavailable or an owner wants the chain below you protected.

Federal Contracts

The Miller Act requires payment bonds on federal construction contracts above the statutory threshold, alongside the performance bond.

State & Local Work

Little Miller Act statutes extend the requirement to state, county, city, school, and authority projects nationwide.

Private Projects

Owners and construction lenders requiring payment bonds to keep liens off the title and the project financing clean.

Subcontractor Bonds

General contractors requiring payment bonds from trade subs so second-tier suppliers do not become the prime problem.

How It Works

How we get you bonded

Apply online

Start with our guided application, about five minutes. Save your progress and finish later if needed.

Build your submission

We assemble the underwriting package: financials, work in progress, and bank and supplier references.

Place with a carrier

We shop your account across our carriers, including small contractor programs, and negotiate rate and capacity.

Bonds issued

Payment and performance bonds go out together on the owner form with the required seals and powers of attorney.

Questions

Payment bond FAQs

How much does a payment bond cost?

Premium is charged on the contract price and is normally quoted as one combined rate covering both the payment and performance bonds rather than billed separately. That rate typically runs 1 to 3 percent and slides down as contracts get larger. On most public work you build the premium into your bid, so the owner effectively funds it through your price.

What is the difference between a payment bond and a performance bond?

Direction. The payment bond faces downward and protects the subcontractors, laborers, and suppliers who work under you. The performance bond faces upward and protects the project owner by guaranteeing the work gets completed. They are issued as a pair on the same contract, usually each at the full contract price, and underwritten together.

Who can file a claim on my payment bond?

Generally the subcontractors, laborers, and material suppliers with a direct relationship to you, and in many cases second-tier parties working under your subs, provided they give the notices the statute requires. There are strict deadlines, often measured from the last day of work or last delivery, and a claimant who misses them loses the right. If a claim arrives, tell us straight away rather than trying to settle it quietly.

Can I get bonded as a new or small contractor?

Yes. Carriers run small and emerging contractor programs, and the SBA Surety Bond Guarantee Program supports contractors who do not yet meet standard underwriting. Expect a lower initial job limit that grows as you complete bonded work. Clean personal credit, a CPA-prepared financial statement, and an honest work-in-progress schedule matter more than how long the company has existed.

Do I have to sign a personal indemnity agreement?

On nearly all contract surety, yes. Business owners and often their spouses sign a general indemnity agreement, which secures the surety right to reimbursement for anything it pays. It is standard practice across the industry rather than one carrier being difficult. We will walk you through it before it reaches you.

What happens if a supplier claims against the bond?

The surety investigates whether the claim is valid and whether the required notices were given. If it is valid, the surety pays the claimant and then looks to you and your indemnitors for reimbursement. Paid claims also affect your capacity and rate going forward, so the practical answer is to keep your payables current and flag cash-flow trouble to us early, while there are still options.

Keep Exploring

More Contract bonds

Bonds due before you can start?

Start the application now and a BF Bond contract agent will work the submission with you.