Surety
Merchants Bonding Company
Merchants Bonding Company is an Iowa surety carrier whose focus is almost exclusively surety rather than general insurance lines. It writes contract surety bonds for building and construction projects, commercial surety bonds including licence and permit, court and probate, public official and vehicle bonds, fidelity and ERISA bonds, notary and E&O bonds, and subdivision bonds for developers.
Bonds are sold exclusively through independent agents: a principal contacts an agency or uses the carrier's Find an Agent directory, and Merchants then works with that agent to underwrite the account and set surety credit. The company describes its underwriting as common sense, evaluating accounts on their own merits with a high value placed on business and personal net worth, and says it applies no inflexible minimums or ratios. Appointed agents work through The Hub, The Hub Express, an Erlon integration, the Rapid Access Program and an API. A Specialty Solutions team supports small and emerging contractors with the SBA Surety Bond Guarantee program (in partnership with the SBA and Foundation Surety & Insurance Solutions), collateral options, funds administration and subdivision bond obligations.
E.H. Warner and Merle Milligan founded Merchants Mutual Bonding Company in 1933, and the company has stayed under four generations of family leadership. It is headquartered at 6700 Westown Parkway, West Des Moines, Iowa, with branch offices around the country, employs more than 230 associates and handles business in all 50 states. It has held an “A” (Excellent) rating or better from AM Best since 1958. An affiliate, Merchants National Bonding, Inc. (doing business as Merchants National Indemnity Company in California), writes select contract and commercial surety bonds in 49 states and D.C.
Owners cannot buy direct: the route in is an appointed agent. The subdivision bond page includes a liquidity estimator comparing a bond with a letter of credit, which the company states is illustrative only and not a quote or commitment. Renewal payments go through pay.merchantsbonding.com or by check to a Minneapolis lockbox, and general enquiries are on (800) 678-8171.
Best for
Developers and contractors who need a subdivision, performance or licence bond and already work with an independent insurance agency, including newer contractors who may need the SBA guarantee or funds administration. Not a direct-to-owner purchase.
What they do
- Contract surety bonds (bid, performance and payment)
- Commercial surety bonds
- Licence and permit bonds
- Court and probate bonds
- Fidelity and ERISA bonds
- Notary and E&O bonds
- Subdivision bonds for developers
- Funds administration for bonded contracts
- SBA Surety Bond Guarantee program bonds
Details
| Attribute | Value |
|---|---|
| Founded | 1933 |
| Team size | 201-500 employees |
| How they charge | Performance bonds are generally 1 percent to 3 percent of the contract price; the contractor includes the premium in the bid. |
What stands out
- Founded as Merchants Mutual Bonding Company in 1933 and focused almost exclusively on surety since.
- Has held an “A” (Excellent) rating or better from AM Best since 1958.
- Employs more than 230 associates and handles business in all 50 states.
- Affiliate Merchants National Bonding, Inc. writes select contract and commercial surety bonds in 49 states and D.C.
Common questions
- How do I obtain a bond from Merchants Bonding Company?
- Merchants sells exclusively through independent agents. Contact your insurance agency to find out whether it produces surety bonds, or use the company's Find An Agent directory to locate a surety elite agent in your area. Merchants then works with that agent to underwrite the account and determine surety credit.
- What information is needed to obtain a contract bond?
- Underwriting an account typically begins with business financial statements for the past 3 years, the most recent personal financial statement for each owner, a completed contractor questionnaire, a bank reference, and a summary of the company and its surety needs. How long approval takes varies with the complexity of the request.
- How much do surety bonds cost?
- Rates vary with the size and type of the project and the contractor's bonding capacity. Merchants states that performance bonds are generally 1 percent to 3 percent of the contract price, that the contractor includes the premium in the bid so the project owner effectively pays it, and that there is usually no cost for the bid bond or for a payment bond purchased alongside a performance bond.
- How does a commercial bond renew?
- It depends on the bond. Some are continuous and need no further documents, so the bondholder receives only an invoice. Some need a continuation certificate filed with the obligee, and some need an entirely new bond filed; in both cases the documents are issued after the renewal payment is received. Some bonds run their term once and do not renew. Renewal documents usually arrive about five business days after payment.
- Why use a subdivision bond instead of a letter of credit?
- Merchants argues a subdivision bond meets municipal improvement requirements without tying up cash or bank lines the way a letter of credit backed by cash collateral does, keeping cash available for construction and preserving credit for financing. Its online comparison of the two is described as illustrative only, not a quote, commitment or offer to issue a bond.