Role

• All over the country, businesspeople sign contracts promising to pay a supplier for goods and services or promising to supply goods and services. Sometimes, the person receiving payment (often called an "obligee") asks for a surety, which is a third party that promises to pay the supplier no matter what happens. This guarantees that the obligee will be compensated.
  
  

Uses

• Many kinds of businesspeople and industries use surety bond providers. Surety bonds guarantee sales contracts and help stabilize supply chains, and they are also given to courts when someone gets out on bail.
  
  

Risk

• Surety bond providers take on financial risk when they promise to pay if their customers cannot. Surety bond providers charge fees for this guarantee and often ask customers to put up collateral -- something of value that can be sold to pay a debt, such as a house -- until the surety bond is canceled.
  
  

Bonds

• The actual bond is a legal contract that promises payment under certain conditions. If the customer cannot pay, the bond is forfeit, which means that the surety provider loses money. When a customer pays, the bond is canceled, which means that the provider no longer has any obligation to pay the obligee.