bond
Definition
A bond is a financial guarantee that promises money will be paid out if someone fails to meet their obligations or causes harm. In business, bonds typically come in two flavors: debt bonds where a company borrows money and promises to repay it with interest, and surety bonds where an insurance company guarantees that your business will perform a job or follow the law. Think of a surety bond as a safety net that protects your customers if you fail to deliver what you promised.
Example
A contractor takes out a surety bond before starting a home renovation project, so if they disappear halfway through the job, the homeowner can file a claim against that bond to recover their money.
Watch Out
Many industries and government contracts require you to carry a specific type of bond before you can legally operate or bid on work, so check your local licensing requirements early.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.