What You Need to Know About Fund Control and Surety Bonds – Part 1

Company GoalsWe have all seen this scenario…a new or growing contractor with good character and strong technical abilities can’t get a performance and payment bond because of their current financial picture, the bond size, or both. It’s the old story – you can’t get a loan unless you don’t need the money!

What is fund control?

One tool used to help new or growing contractors get those jobs that were previously out of reach is the use of fund control in conjunction with a project. “Fund Control” means your contractor’s customer, the obligee on the bond, will send proceeds from the project to the fund control company who is working on behalf of the surety that issued the bond for the project. The fund control company will then submit payments to the contractor, subcontractors, suppliers, and equipment rental providers based on information submitted by the contractor in conjunction with their pay request to the obligee. This service gives the surety company the comfort that all funds from the bonded project will get used to pay vendors who supplied skill, materials or equipment to the job site for the project, in essence protecting the payment bond.

As the fund control company prepares payments to vendors, they will also prepare lien waivers to be signed by the party receiving the check. This function of the fund control company helps protect the project, as well as the contractor, from liens and claims.