One of the risks with buying medicare bonds is that if your business begins struggling financially, you may not be able to qualify for the renewal of your bond. Sometimes your cash flow is okay, but if your financial reports show that you’re taking a hit, you most likely will be denied renewal.
One way around this is collateral – some surety bond companies will accept collateral or issue a higher rate even if you don’t meet their ideal conditions. But it’s a scary scenario, because sometimes if your bond is revoked, the state can actually revoke your license to do business.
So what can you do to minimize the risk of losing your bond? Well, of course you want to maintain a high credit score and keep your business financials in order. Those are the two biggest factors the bond company will look at when it’s time for renewal.
Another tip is to make sure you buy your surety bond for two or three years rather than a single year. This gives you a longer period of time before renewal, and if something happens and your business take a hit, you have time to repair the finances before your bond is up for renewal.
Also, you can usually save money by buying several years in advance. The savings can be anywhere from 10% to 20% depending on the policies of the company you are buying from. And your rate is locked in, so you eliminate the chance of your rate increasing each year!
Purchasing additional years is definitely a great option for saving money and for reducing the chance of denial of renewal, by giving you a longer period of time between renewals.
