You’d think that with the number of bonding companies located in every major metropolitan area, every bail bond company would be profitable, right? Especially in areas with high crime-rates, a bonding company might seem like an all-upside profitable business for any entrepreneur, given that they have a licensed bail bondsman on staff. What many people fail to realize is that with the promise of profits in any financial industry comes proper risk-management, especially with bail bonds companies.
A Bail Bond Company’s Expenses
Most bail bonds companies are located in shabby little offices with bars on the windows. They’ve got stained carpets and the smell of stale cigarettes. The cost of operating one of these businesses can’t be that high, right?
Yes and no.
The upkeep on any office is ultimately up to the owner’s discretion. Don’t be fooled by their appearances, any office located in the heart of a metropolitan area has very high rent. A bail bonds company pays out several thousands of dollars every month for their lease. On top of that, they also have to pay a percentage to an insurance company to cover every single one of the bonds that their bondsman writes. Furthermore, if one of their clients skips out on their court date, they have to hire a bounty hunter (bail recovery agent) to find them and bring them to jail. Otherwise, they have to pay for the entire bail amount themselves. For more information about bail bonds in general, head over to our homepage.
Now that we’ve covered the major expenses, which could reach into the tens of thousands in a bad month, let’s talk about the upside and the profitability of a bail bonds company.
A Bail Bond Company’s Income
We all know how bail bonds companies earn their money. They charge a fee for bonding a person out of jail. That fee is collected from the cosigner on the bond. Most people don’t have a lot of money to pay for the bail outright, so they seek the services of a professional bondsman. In each county, there are set rates that a bonding company can charge. For instance, here in Atlanta, a bail bonds company can charge no less than 10% and no more than 15% of the total bail amount. While security deposits and collateral can be added on to the fee, it leaves very little wiggle room to beat out the competition. The service fee is the main source of income that equates to a bonding company’s profitability. This is especially true in high-risk bail bonds.
In order for a bail bonds company to sign a bond, the risk must be proportionate to the potential reward. The stronger the cosigner’s qualifications, the more likely a bonding company is going to take the accused as a client.
Profit = Income – Expenses
At the end of the day, a bail bonds company is profitable only if the expenses are lower than the gross income. Several bonding companies fail every single year due to taking on too much risk. That’s why it is important for the consumer to realize what happens as a cosigner on a bond. The bonding industry is a gamble and if too many defendants bail jump, then the company goes under very quickly.
As with any business, by managing risk intelligently and staying up-to-date on bail laws, then a bail bonds company can be very profitable indeed.