Expanding a business to provide more products, goods, and services, not only brings traffic to a store but also directly generates revenue. This is one reason why retail store owners and managers sell lottery tickets to bring in more customers and profits.
As a business owner, you may have been considering selling lottery tickets at your store. Then you may already be familiar with lottery bonds.
In this article, you will find more information about what are lottery bonds, why it is necessary to secure a lottery bond and other specific details.
So why do you need a lottery bond to begin with?
Lottery surety bonds are required by some states operating the lottery to ensure that the business issuing lottery tickets (often referred to as a lottery sales agent) will make complete and prompt payments.
A lottery bond is a form of a commercial bond that protects the public from illegal or unethical actions by the lottery seller. The bond protects those who play lottery from manipulation or misuse of funds in the lottery system. Lottery bonds must be obtained before a business can start selling lottery tickets.
If a business does not pay the required taxes to the state lottery when selling lottery tickets, a claim can be filed against the bond.
So that you know, each state has its lotto bond form and requires different bond amounts. Not all states require a lottery bond, but to ensure adherence to state laws and regulations contact your state directly to determine the requirements.
How does a lottery bond work?
Lottery sellers need to purchase a bond from a surety company and submit themselves to a credit and background check before their applications can be approved.
Like all surety bonds, lotto bonds require three parties to make it work:
- The obligee: In this case, the one who is being protected is the general public as required by state laws.
- The principal: The business that wants to sell lottery tickets.
- The surety company: The surety bond provider who assures the obligee that the principal will not misuse lottery funds and promptly pay taxes on time.
What do you need to secure a lottery bond?
A surety company may request from you a list of documents in the process of evaluating the bond. They include, but not limited to:
Commercial bond applications: This is an application, usually 1 or two pages, which will provide the surety company with general information on the business (principal).
Financial statements: This includes the business and personal income statements, balance sheets, short-term and long-term assets, stocks, statement of cash flows for accounts payables and receivables, etc.
Business owner’s resume: This will give a clear and concise work history and experience of the person who either owns or oversees the business.
License or permit copies: A surety company will also look into the necessary license and permit of an already operational business before a bond can be issued.
Current bank statements: A lottery bond will require that the principal has a certain net worth. The easiest way to prove a principal's assets is to check its current bank and brokerage statements that can validate some of the assets that were declared in a financial statement.
Of course, lotto bonds are going to be different from state to state. Some states may even require a deposit or another form of surety. There will be different bonding minimums, various requirements for licensure, and types of coverage in getting your application approved. Knowing what your state requires will help you to learn how much a lottery bond would cost you.
What is the amount required to get a lottery bond?
The amount of the lottery surety bond you will need is usually based on a standard minimum requirement (indicating a portion of sales). Based on the size of lotteries, this specification minimum may be increased by certain states. You can expect to pay somewhere in the range of $5,000 to $20,000 worth of bond coverage for lottery sales.
Can you get a cheaper rate? Yes, you can. A surety underwriter reviews your personal credit to also determine rates on bonds. The stronger your credit rating and personal financials, the lower your rate will be.
In general, lottery bonds are not difficult to obtain, are low risk, and affordable. That makes it relatively quite easy to get into the business of selling lottery tickets from your current retail outlet. Pharmacies, convenience or grocery stores, supermarkets, liquor emporiums, mom and pop boutiques, specialty shops, and even a deli can all sell lottery tickets.
Securing a lottery bond depends on where you are located and what your state specifies to meet a variety of requirements. Check with your local state's specific regulations and let Surety Bond Authority assist you in obtaining that lottery bond before moving ahead. Selling lotto tickets can boost your profit margins so make sure to get bonded today.