Do I Need a Surety Bond for My Small Business?

The Quick Answer

You probably need a surety bond if any of these are true:

1. Your state or city requires one for your business license
2. You bid on government contracts
3. You need a specific permit that requires bonding
4. You import goods into the United States

If none of those apply, you likely don’t need one. But keep reading — the requirements aren’t always obvious, and the penalties for operating without a required bond can be steep.

Situation 1: State or Local License Requirements

This is the most common reason small businesses need surety bonds. Many states require certain professionals to post a bond before they can get licensed.

The logic is simple. The bond protects the public. If you take someone’s money and don’t deliver, they can file a claim against your bond and potentially get paid.

Each state sets its own rules. The same profession might require a $25,000 bond in California and no bond at all in Virginia. There’s no national standard.

Your state’s licensing board website will tell you if your profession requires a bond and how much it needs to be. If you can’t find it, call them. They answer this question a hundred times a day.

Situation 2: Government Contracts

If you bid on federal, state, or local government construction projects, you’ll almost certainly need surety bonds. The Miller Act requires performance and payment bonds on all federal construction projects over $150,000.

Most states have their own versions of this law — called “Little Miller Acts” — that apply to state-funded projects. The thresholds vary, but if you’re doing public work, expect to be bonded.

Government contracts typically require three types of bonds:

• Bid bond: Guarantees you’ll honor your bid if selected (usually 5-10% of the bid)
• Performance bond: Guarantees you’ll complete the project (usually 100% of the contract)
• Payment bond: Guarantees you’ll pay your subcontractors and suppliers (usually 100% of the contract)

Situation 3: Permits That Require Bonding

Some permits come with bond requirements even if your professional license doesn’t. Common examples:

• Building permits in certain jurisdictions
• Right-of-way or excavation permits
• Environmental permits
• Temporary event permits
• Alcohol permits in some states

These are separate from license bonds. You might have a contractor license bond and also need a permit bond for a specific project. They’re different bonds with different obligees.

Situation 4: Importing Goods

If you import goods into the United States, you need a customs bond. This is required by U.S. Customs and Border Protection.

There are two types:

• Single-entry bond: Covers one shipment. Usually costs $5-$15 per $1,000 of shipment value.
• Continuous bond: Covers all shipments for a year. The minimum bond amount is $50,000, and the annual premium is typically $400-$600 for standard risk.

If you import regularly, the continuous bond is almost always cheaper.

Industries That Commonly Need Bonds

Industry	Common Bond Type	Typical Amount
General contractors	Contractor license bond	$10,000 – $25,000
Electricians	License bond	$5,000 – $15,000
Plumbers	License bond	$5,000 – $15,000
HVAC contractors	License bond	$10,000 – $25,000
Auto dealers	Dealer bond	$25,000 – $100,000
Mortgage brokers	Mortgage broker bond	$25,000 – $150,000
Freight brokers	BMC-84 bond	$75,000
Collection agencies	Collection agency bond	$5,000 – $50,000
Notaries	Notary bond	$5,000 – $25,000
Travel agencies	Travel agency bond	$10,000 – $50,000
Tax preparers	Tax preparer bond	$5,000 – $50,000
Staffing agencies	Staffing bond	$10,000 – $100,000
Private investigators	PI bond	$5,000 – $25,000

This isn’t a complete list. There are over 50,000 different bond requirements across federal, state, and local jurisdictions. Your specific bond depends on your industry, your state, and sometimes your city or county.

Industries That Usually Don’t Need Bonds

Not every business needs a surety bond. Many industries operate without them.

Industry	Bond Needed?	Notes
Restaurants	Usually no	Health permits yes, bonds no
Retail shops	Usually no	Unless selling regulated goods
Consulting firms	No	Unless government contracting
Software companies	No	Unless government contracting
Hair salons	Usually no	Varies by state
Photography studios	No	Standard business license only
Graphic designers	No	Standard business license only
Online businesses	Usually no	Unless selling regulated goods
Fitness studios	Usually no	Some states require bonds for prepaid memberships

If your business is service-based, doesn’t require a specialized state license, and doesn’t work with government contracts, you probably don’t need a surety bond.

What It’ll Cost

For most small businesses needing license bonds, the annual premium ranges from $100 to $1,000. That’s the real premium — what you actually pay per year.

Here’s a rough guide:

Bond Amount	Good Credit (1-3%)	Average Credit (3-5%)	Poor Credit (5-10%)
$5,000	$50 – $150	$150 – $250	$250 – $500
$10,000	$100 – $300	$300 – $500	$500 – $1,000
$25,000	$250 – $750	$750 – $1,250	$1,250 – $2,500
$50,000	$500 – $1,500	$1,500 – $2,500	$2,500 – $5,000

For many small businesses, the bond is one of the cheapest parts of getting licensed. It’s often less than the license fee itself.

The Step-by-Step Process

Getting a surety bond is less complicated than most people think.

Step 1: Find out your exact requirement. Contact your state licensing board, check the permit application, or review the contract requirements. You need to know the bond type and the bond amount.

Step 2: Gather basic information. You’ll need your Social Security number (for the credit check), business name and address, the specific bond type and amount, and your license or permit number if you have one.

Step 3: Get quotes. Apply with multiple surety sources. The application is usually a one-page form. Most bond applications don’t require a hard credit pull — they use a soft pull that doesn’t affect your score.

Step 4: Review and purchase. Compare the quotes. Pay attention to the premium, the surety company rating, and any additional fees. Purchase the bond.

Step 5: File the bond. Submit the original bond to the obligee (the state, the court, the project owner). Keep a copy for your records. Some states allow electronic filing.

The whole process can take as little as a day for standard license bonds with good credit. More complex bonds — performance bonds, large contract bonds — take longer.

Quick Checks

Still not sure if you need a bond? Run through these quick checks:

• Check your license application. If it mentions “surety bond” anywhere, you need one.
• Call your state licensing board. Ask directly: “Does a [your profession] license require a surety bond in [your state]?”
• Check your contract. If you’re bidding on a project, the bid documents will specify bond requirements.
• Ask your competitors. Other businesses in your industry in your state will know.

Don’t assume you don’t need one. Operating without a required bond can result in license revocation, fines, and legal liability. It’s not worth the risk.

Explore Your Options

Browse all bond types to find your specific requirement. Or pre-qualify to see what your bond will cost based on your credit and the bond you need — no hard pull, no sales pressure.

The Bottom Line

Most small businesses that need surety bonds need them because their state says so. It’s a licensing requirement, not a choice.

The good news is that license bonds for small businesses are usually affordable — often $100 to $500 per year with decent credit. The key is knowing your exact requirement, shopping multiple sources, and not overpaying in broker commissions for what’s often a straightforward product.