What type of bond would a contractor need to guarantee the completion of a construction project?

A performance bond is specifically designed to guarantee the completion of a construction project by a contractor. This bond serves as a financial safeguard for the project owner, ensuring that if the contractor fails to fulfill their obligations under the contract, the bond issuer (usually a surety company) will step in to either complete the project or compensate the project owner for any losses incurred.

Performance bonds are typically required for construction contracts to protect against the risk that a contractor may not be able to successfully complete the project as per the agreed terms. This requirement instills confidence in project owners that their investment will be protected, and that there is a mechanism in place to ensure compliance with contractual obligations.

In contrast, the other types of bonds mentioned serve different purposes. A license bond is intended to guarantee that a contractor will comply with local laws and regulations associated with their business operations. A bid bond provides financial assurance that a contractor will enter into a contract if their bid is accepted, and a payment bond guarantees that subcontractors and suppliers will be paid for their work and materials provided on a project. While all types of bonds play important roles in the construction and contracting landscape, the performance bond directly assures the project owner of project completion.