Why Surety Bonds Matter in Farm Construction Projects

Why Surety Bonds Matter in Farm Construction Projects

As a farmer, smart infrastructure investments can enhance your efficiency and productivity. Whether it’s installing a new irrigation system or expanding your storage facilities, the right upgrades can also strengthen your farm’s financial success.

Bringing these types of projects to life often requires the support of an experienced construction team. But what if the contractors you hire don’t follow through with their promises?

There’s an easy solution: construction bonds. These surety bonds can protect your investment and peace of mind during major agricultural builds. Keep reading to learn what they are, how they work, and how to use them to ensure your project’s success. 

What Is a Farm Construction Bond?

A construction bond, also known as a contract bond, is a type of surety bond that provides project owners with financial protection if their contractor fails to fulfill their responsibilities. Like all surety bonds, these bonds create a legally binding agreement between:

• The obligee (the farm owner or project developer)
• The principal (the contractor)
• The surety (the company providing the bond)

While there are several types of construction bonds, the two that are most relevant to agricultural construction projects include:

1. Performance bonds – These bonds guarantee that contractors will complete a project according to its contract terms. If they do a poor job or abandon the project prematurely, their surety bond will cover the costs of hiring a replacement to finish the job. 
2. Payment bonds – These bonds ensure that a contractor’s subcontractors, laborers, and suppliers get paid on time, protecting the project owner from any liens or disputes that result from unpaid bills.

Together, performance and payment bonds help ensure that your farm construction project stays on track and prevent you from getting stuck with a hefty bill if something goes awry.

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Why Should Farmers Care About Surety Bonds?

Farm construction isn’t small-scale work, especially in 2025. Agricultural projects are becoming increasingly complex and expensive. So, if you want to build a new barn or expand your greenhouse, your project will likely require a significant investment.

Unfortunately, not every construction project goes as planned. Here are just a few issues that can arise:

• Your construction project goes off the rails – Contractors can run out of funds, fail to meet key deadlines, deliver poor quality work, or quit before finishing the project.
• Costly and time-consuming legal disputes – Without construction bonds, you may have to pursue lengthy legal action to recoup your losses if something goes wrong.
• You might be liable for unpaid bills – If your contractor doesn’t pay a subcontractor or supplier, they could come after you, even if you’ve already paid your contractor in full.

Performance and payment bonds are specifically designed to protect you against these risks. In the event of a contractor’s poor performance or non-payment, you can file a claim with their surety company to recover losses and get the job back on track. 

Construction Bonds: 3 Real-World Examples

To showcase the value of surety bonds in agricultural construction, let’s take a look at three scenarios where they can save the day:

• Scenario 1: Performance Problems – You hire a contractor to build a new grain bin to increase your post-harvest storage. Halfway through the project, the contractor files for bankruptcy. Luckily, you made sure this contractor had a performance bond in place. You contact their surety company to see if they can suggest a replacement or reimburse you for the untimely disruption. 
• Scenario 2: Unpaid Suppliers – You hire a contractor to help you expand your greenhouse. After the project wraps up, one of their suppliers threatens to file a lien on your property because they haven’t been paid. You file a claim with your contractor’s surety and they pay the supplier directly. This quick fix halts the lien and its associated legal headaches. 
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• Scenario 3: Cutting Corners – A contractor rushes to install your new center-pivot irrigation system and fails to follow your contract’s specifications. Rather than absorbing the cost of arranging repairs, you file a claim against their performance bond and receive prompt compensation from their surety.

How to Protect Your Farm With Construction Bonds

If you're a farm owner embarking on a construction project, here are four ways to safeguard your investment with a surety bond:

1. Request construction bonds upfront – Ask your contractor to provide a performance bond and a payment bond before the project starts. If they hesitate or push back, consider it a red flag and seek out other contractors with stronger reputations and bonding credentials.
2. Verify the bond's validity – Next, make sure your contractor’s bond comes from a licensed, reputable surety. You can verify its validity with your state’s Department of Insurance or enlist the support of a trusted surety company, like BOSS Bonds. 
3. Work with experienced contractors – While surety companies review contractors’ experience before approving their performance and payment bonds, it doesn’t hurt to do your own due diligence. Ask prospective contractors if they’ve worked on similar projects. Those who have are more likely to understand and uphold your expectations.
4. Keep copies of all bond paperwork – While bonded contractors are vetted by surety companies, issues can still arise. Keeping copies of their bond documents on hand ensures you’re prepared to file a claim quickly and efficiently if needed.

Why Should You Secure a Surety Bond as a Contractor?

If you’re a contractor interested in working on agricultural projects, getting bonded can make your business more competitive. Surety bonds show that you’re serious, capable, and committed to doing the job right, which are key qualities farmers look for when selecting a construction partner.

Surety bonds can also give you access to higher-value projects, especially those funded through government-backed agriculture programs that require bonding.

If you’re not sure where to start or what type of bond you need, BOSS Bonds can guide you through the process.

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How BOSS Bonds Can Help

The right construction projects can provide an excellent return on investment. But without the right safeguards in place, even the best-laid plans can hit unexpected roadblocks. That’s why construction bonds are so essential.

Construction bonds protect your time, money, and peace of mind, giving you confidence that your project will be completed properly. If you’re ready to leverage them, BOSS Bonds has you covered. We work with over 25 surety carriers around the country. Better yet, we make the bonding process quick, easy, and stress-free. 

If you have any questions about a contractor’s bond requirements or qualifications, we’re happy to help. Reach out to BOSS Bonds today to learn more!

Sources:

Metal Construction News. Agricultural Building Industry: Growth, Change and Metal.

https://www.metalconstructionnews.com/articles/agricultural-building-industry-growth-change-and-metal/

Buildings Guide. Horse barn building cost.

https://www.buildingsguide.com/costs/cost-to-build-horse-barn/?srsltid=AfmBOopj6QzZKyrhyrzUpFf6rHVKj99gkT_xaSRaA5wp4yG6zaRzY6Ky

AG Web. A Simple Checklist to Evaluate ROI on Your Farm.

https://www.agweb.com/news/business/taxes-and-finance/simple-checklist-evaluate-roi-your-farm