The differences between Performance and Payment Bonds
Performance bonds guarantee the Principal performs to the contract in receipt for payment. Sometimes a payment bond will be issued along with a performance bond. This payment bond guarantees the Principal will pay all his/her labor and material bills. These bonds are also known as Contract Bonds.
Another type of Payment Bond guarantees a payment will be made, like the payment off a loan or lease. They are also known as Financial Guarantee Bonds. These are very difficult to obtain and are written by very few surety companies.