Janitorial Bonds are required for many government and corporate cleaning contracts. Learn what these bonds guarantee and how to obtain them.
Janitorial Bonds are a type of Surety Bond that guarantees a contract for various cleaning services. These bonds are often required for contracts involving cleaning services for government buildings, educational facilities and even private properties. These Janitorial Bonds are a type of service contract.
However, Janitorial companies also commonly need fidelity bonds as well. These will be discussed in additional detail below.
The janitorial company responsible for fulfilling the contract is the Principal on the Bond. The obligee is the building owner or property manager that is requiring the Bond. The Surety is the third-party bond company that is guaranteeing the principal’s performance of the contract.
For most cleaning companies, Janitorial Bonds can be purchased quickly with just a personal credit check on the owner(s).Â
However, large bonds and those covering contracts longer than one year will need to submit additional information. This information usually includes the following:
There may also be additional information required such as a copy of the company’s line of credit, resumes on key people and customer references. Underwriting Janitor Bonds is similar to contract bonds and surety bond underwriter look at the 3Cs, which are Character, Credit, and Capacity.Â
For those that do not qualify under a standard program, the SBA Surety Bond Guarantee Program may be an option. This program may even allow for those with past bankruptcies to be bonded. Typically for this program to be an option, the contract must be for one year or less.
Surety Bond companies are leery of long-term contracts. The longer the contract, the more risk to the contractor and the Surety Bond company.Â
Janitorial Contracts often cover periods longer than one year. However, the longest contract many bond companies want to guarantee is two years.Â
It is possible and common to guarantee Janitorial Contracts for longer periods, but the surety bond company usually requires language in the contract to protect themselves.Â
Normally each year after the second must be at the mutual option of the obligee and Surety. This language has become common in these contracts over the years and most obligees will accept them.
Labor is often one of the most significant risks in bonding a Janitorial contract. Getting labor can be a challenge, especially in the current market. Surety Bond underwriters will want to make sure that the company can get the labor to complete the contract.
Surety Bond underwriters will also want to know how the company will manage increasing wages and labor costs. This risk becomes even more of a concern with longer contracts. Long term contracts with escalation clauses are preferred but getting an owner to include this is unusual.
The cost of Janitorial Surety Bonds depends on the qualifications and financial strength of the principal. Most contractors can expect to pay between 1%-3% of the contract amount each year that the contract is in place. Contractors using a credit-based program will pay 3%. Janitorial Bonds are priced similar to Performance Bonds, and you can read about those costs and how to lower them.
Janitorial Bonds require indemnity. That means that if the surety bond company suffers a loss, they will seek reimbursement from the Janitorial company along with any other indemnitors.
Janitorial Surety Bonds are not insurance and many cleaning companies may not be familiar with how these bonds work. You can read more about indemnity.
Janitorial companies almost always need fidelity bonds as well. Fidelity bonds protect against employee theft. They can be written to cover First-Party Theft or Third-Party Theft.
First Party Coverage protects the company from theft by its employees against the Company’s property. Although this is important coverage for every company, it is generally not required for Janitorial companies.
Third-Party Coverage protects the business against the employees’ theft of Customer property. This coverage is essential and usually required for janitorial companies. The reason is because cleaning companies spend a lot of time at the property of customers. They are often alone and unsupervised. Theft is a big risk. An uncovered theft of a customer’s property could put the cleaning company out of business.
Janitorial Fidelity Bonds can be easily purchased for most companies. Generally, only an application is needed. The amount of the fidelity coverage desired and the number of employees determines what underwriting information will be needed. Most Janitorial Fidelity Bonds can be purchased with only a credit check of the owners.
The cost of a Janitorial Fidelity Bond will depend on the amount of the bond and the number of employees. Generally, these bonds are inexpensive. For example, a $50,000 bond for a cleaning company with 5 employees or less can be purchased for about $250 a year online.
While commercial cleaning contracts almost always require third-party fidelity coverage, only certain contracts may need performance bonds. Government contracts will often require both. Performance Bonds guarantee the completion of the contract, for the contract price. Fidelity Bonds protect the client from theft by the cleaning company and its’ employees.
Contact the surety bond experts at Axcess Surety today for all questions or to obtain a Janitorial Bond. We are bond experts with access to all the top Janitorial Bond companies to help you get the bond you need at the best rates. Janitorial and cleaning companies can also learn more about surety bonds, including frequently asked questions by visiting our guide.
1. Janitorial bonds are a type of surety bond that provides financial protection for customers who hire janitorial services.
2. These bonds guarantee that janitorial services will be performed in accordance with the terms of the contract.
3. Janitorial bonds are typically required by state or local governments in order to obtain a janitorial license.
4. The bond amount is typically determined by the government agency that requires the bond.
5. The bond amount is usually based on the estimated value of the services to be provided.
6. The bond is typically issued by an insurance company and is backed by the full faith and credit of the insurer.
7. The bond is typically written for a one-year term and can be renewed annually.
8. If the janitorial service fails to perform in accordance with the terms of the contract, the bond can be used to reimburse the customer for any losses incurred.
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Axcess Surety is the premier provider of surety bonds nationally. We work individuals and businesses across the country to provide the best surety bond programs at the best price.
