How Is A Medicare Bond Price Determined?
Before a price can be determined for a medicare bond, many factors have to be looked at to determine the rate (and to get approval for the bond). The company you are getting the surety bond from will take a close look at your credit, your experience, and your financial reports.
The process is similar in nature to that of applying for a loan – rates will vary depending on conditions including your credit & experience, your perceived stability, the type of bond needed, and the company writing the bond.
Most companies are looking for a high credit score before they’ll issue a medicare bond. Typically they’re looking for the high 600s – think 670 or higher. They also want to make sure that you don’t have any collection agencies pursuing you for unpaid bills, and that your financial reports show that your business is in order and has a promising future. One of the key reports they look at is your profit & loss report… they want to make sure that you have a net income and worth that is positive.
Most surety companies also require that your equity is at least five times the bond amount – so if you’re applying for a $25,000 Medicare Bond, you need to have a net worth of at least $125,000. Of course, this is different, for each state and for each bond type, but this will give you an idea of what to expect.
If you cannot meet these requirements, sometimes your bond application will be denied, or sometimes they will just issue you a higher rate rather than the preferred rate. It’s important to provide as much documentation as you can to show that you are financially stable and credit-worthy.
