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Surety Bonds and Other Hidden Costs Entrepreneurs Should Plan For

Hidden Costs in Business Planning from The Startup Garage

When starting a business, entrepreneurs know they need to plan a budget that funds, at minimum, the entire first year of operating costs. Unfortunately, hidden start-up costs almost always come along with starting a new business. These hidden costs often result in a shortage of funding at inopportune times. As such, entrepreneurs should identify all potential start-up costs before developing their final financial plans.

Even though many major industries legally require professionals to maintain surety bonds, their costs often come as a surprise to entrepreneurs. Bonding is often the first big budget buster because it’s typically required before an entrepreneur can apply for a business license.

So, what kind of professions require surety bonds?

A myriad of industries require business owners to purchase surety bond insurance before they can be licensed. Surety bonds provide financial guarantees that protect consumers rather than the policy holder. As such, those required to purchase surety bonds typically work in industries that provide services to consumers. The following professions are just a few that almost always require surety bonds as a part of the licensing process:

  • auto dealers
  • cleaning or janitorial companies
  • construction professionals
  • collection agencies
  • heath care professionals
  • mortgage professionals
  • telemarketers

The exact bonding requirements entrepreneurs must fulfill vary depending on state laws. For example, an auto dealer in Florida needs a $25,000 surety bonds whereas a California auto dealer needs a $50,000 surety bond.

Generally speaking, the bigger the bond, the higher the cost. Sureties also review the financial records of all clients, and those with low credit scores typically pay higher premiums for their bonds. If an entrepreneur doesn’t set aside the necessary funds to pay for a surety bond, getting a business license could take much more time than anticipated.

What are some other hidden costs to starting a business?

Once entrepreneurs purchase their bonds as required, they can apply for a business license. However, hidden start-up costs don’t stop with surety bonds. When preparing to start a business, entrepreneurs might also need to set aside money for

  • license and registration fees
  • business incorporation
  • rent
  • utilities
  • Internet service
  • office supplies
  • background checks for job applicants
  • financial advisers/accountants
  • lawyer fees

These are just a few examples of hidden costs that can adversely affect entrepreneurial budgets. Without planning for all potential costs, entrepreneurs could run out of funds and find themselves in financial ruin. When it comes to budgeting for a new enterprise, entrepreneurs should know it’s better to be safe than sorry. Eliminating the opportunity for hidden costs to pop up allows entrepreneurs to create realistic budgets they can stick to.

Kevin Kaiser is a co-founder of, a surety bond company that issues bonds to help entrepreneurs get their enterprises up-and-running as soon as possible. As a part of its educational outreach program, provides informational articles to help entrepreneurs understand the legal implications related to bonding and business start-ups.


Whether you have a question about Surety Bonds and Hidden Costs, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!