What type of bond is required by lenders to ensure completion of performance obligations?

Completion bonds are specifically designed to provide assurance to lenders and project owners that a project will be finished according to the terms of the contract. When a lender requires a completion bond, it serves as a form of financial security that guarantees the completion of performance obligations associated with construction or service contracts.

This type of bond effectively protects the lender's investment by ensuring that if the contractor fails to complete the work, the surety company that issued the bond will either complete the project or financially compensate the lender for the costs incurred in completing it. The presence of a completion bond offers reassurance that the project will reach completion as initially intended, thereby facilitating funding approval and project execution.

Performance bonds, while also ensuring that a contractor fulfills their contractual obligations, do not specifically guarantee completion in the same definitive manner as completion bonds. Therefore, understanding the specific roles of different types of bonds is crucial for making informed decisions in the context of public adjusting and the construction industry.