Just imagine this situation. Let’s say you’re an up-and-coming contractor. You’ve either just opened up, or your business is growing. You’ve got great character and rock-solid technical abilities. Here’s the problem. You can’t get approved for a performance and payment bond because of either the bond size, your current financial situation, or both. It’s the old story, where you can’t get approved for a loan unless you’re in a position where you don’t need a loan.
The good news is, there’s a means of helping contractors that are new or growing attain jobs that were previously just out of reach, and that’s known as fund control in conjunction with a project. Fund control refers to your contractor’s customer, the obligee on the bond, who will send proceeds from the project over to the fund control, who works on behalf of the surety that issued the bond for the project. Next, the fund control company submits payments to the suppliers, contractors, subcontractors, and equipment rental providers. This information is provided by the contractor in conjunction with the pay request to the obligee. This service provides reassurance to the surety company that all of the funds from the bonded project are utilized to pay vendors that offered supplies, skill, or equipment to the job site for the project. Essentially, it protects the payment bond.
While the fund control company readies the payments to the vendors, they also prepare lien waivers that are to be signed by the party receiving the check. As a result, the fund control company protects the project, along with the contractor, from claims and liens.