Performance bonds are put in place by a performance bond company, and they are to protect a company that hires a contractor just in case the contractor does not do what he said he would do. If that is contract or not, the performance bond company comes in and sets things right if anything goes wrong. Should the performance bond company have to do that, the contractor has to pay that money back to the performance bond company, and thus the company doing the hiring of the contractor is protected. How does having a performance bond help your business, though? Performance bonds help the hiring agency, but how can it help your business as a contractor?
Think of things from the perspective of the hiring company. If you are that company, then you want to feel as secure as possible, just like anyone else. If you don’t feel secure, you shy away from doing business with anyone. If you are a contractor, and you already have a performance bond in place when you walk in to bid on the project, how much more secure does that company that might hire you feel? Think about that versus the guy walking in without a performance bond that just goes and gets one when he finds out he has to have one. There is a big difference. That is the measure of security, and that is why you should really have a performance bond.