A payment bond — also known as a labor and material bond — guarantees that a contractor will pay all subcontractors, laborers, and suppliers who provide work or materials on a construction project. It ensures that everyone in the project's supply chain is paid, even if the general contractor defaults or runs into financial trouble.
Why Payment Bonds Exist
On private projects, an unpaid subcontractor or supplier can file a mechanic's lien against the property to secure payment. But public property — schools, roads, government buildings — cannot have liens placed against it. The payment bond solves this problem: it provides a financial guarantee that unpaid parties can claim against instead of filing a lien.
When Is a Payment Bond Required?
- California public works — Payment bonds are required on public works contracts, protecting subcontractors and suppliers who cannot lien public property.
- Federal projects — The Miller Act requires payment bonds on federal construction contracts over $150,000.
- Private projects — Some private owners require them to keep their project lien-free.
Payment and Performance Bonds Together
Payment bonds are almost always issued alongside performance bonds. Together, they provide complete protection: the performance bond guarantees the project is completed, and the payment bond guarantees everyone who worked on it gets paid. When you bid a bonded project, you'll typically need both.
Protecting Your Reputation
Beyond meeting legal requirements, carrying a payment bond signals to project owners and subcontractors that you are financially sound and reliable — making you a more competitive bidder.
How to Get a Payment Bond
Because payment and performance bonds guarantee the full scope of a project, surety companies underwrite them based on your financial strength, experience, and track record. The process involves reviewing your financial statements and work history. We guide contractors through every step and know how to present an application for approval.
Why Advanced Surety?
We specialize in contract surety bonds and work with A-rated carriers that actively write construction bonds in California. With a former underwriter on your team, you get expert guidance on qualifying for the bonding you need to win more work.