The establishment of electronic surety bonds is owed to the National Multistate Licensing System and Registry (NMLS), an organization that simplifies the process of obtaining and validating professional credentials, such as licenses, across different states. The creation and prevalence of electronic surety bonds are primarily due to NMLS’s advocacy for their adoption and their provision of secure technology to facilitate a smooth electronic filing process.
Before the advent of electronic surety bonds, bond processes were entirely paper-based, with inherent disadvantages. With the swift advancements in information technology at the onset of the 21st century, most industries, including those managing financial, legal, or other confidential data, began shifting toward digital systems. It was apparent that the bonding process could be more efficient. This prompted the NMLS to step forward and steer the revolution. And so, the digital transformation of surety bonds came into existence. Today, electronic surety bonds are rapidly gaining popularity and are on the verge of becoming the primary, if not the only, choice!
Advantages of Electronic Surety Bonds
The merits of electronic surety bonds are best appreciated when contrasting them with the drawbacks of traditional paper-based bonds. Paper bonds often took longer to process, were more challenging to initiate, and had a higher probability of errors. For those who needed bonds quickly, the process could be unnecessarily lengthy or prone to unexpected interruptions due to these paper-based systems.
The introduction of electronic bonds dramatically improves these issues, ensuring the bonding process is highly efficient, with many bonds being issued within 24 hours. The digital nature of this process also reduces the operational costs for bond providers, savings that are often passed down to those seeking bonds. Furthermore, the application for electronic bonds can be initiated instantaneously, eliminating the need to wait for physical paperwork to arrive. Thus, most individuals find electronic surety bonds superior in almost every aspect.
How and Where to Submit an Electronic Surety Bond?
Initially, when electronic surety bonds were launched in 2016, it was up to individual states to decide whether they would recognize these bonds submitted digitally. Only a handful of states agreed to do so in the beginning. However, as the program demonstrated its effectiveness, more states began to accept this new format. By the beginning of 2022, 43 states had consented to acknowledge electronic surety bonds. The states that have yet to adopt this process include:
- New York
- New Mexico
What is the Process for Submitting a Surety Bond Electronically?
The process for electronic filing may differ based on the type of bond, the issuing entity, and the bond amount. Generally, the individual seeking the bond is required to submit specific fundamental details via an online platform:
- A completed bond application.
- Consent to conduct a credit check.
- Supplementary documentation (for instance, a financial statement or a copy of the bond requirements).
The surety agency that facilitates the connection between the bond seeker and the bond provider oversees the specifics to ensure that the electronic submission is conducted appropriately and complies with all relevant regulations. Many opt to utilize digital platforms such as DocuSign, which enable formal signing and document exchange between parties.
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At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.
Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/