Once a contractor is declined for a performance bond, it doesn’t necessarily mean the bond cannot be written. The SBA, collateral, and fund control are all options but for small requests sometimes a strong co-indemnitor will suffice. Simply put, a co-indemnitor is a cosigner, and serves the same purpose as a co-signer for an automobile. The co-signer AND the contractor are indemnifying the surety from loss.
A co-indemnitor isn’t utilized much for performance bonds because it’s only appropriate for the right type of contract, contract size, and principal. Though there is no one-size-fits-all approach for when a co-indemnitor is appropriate, a good rule of thumb would be for a fast turning general construction contracts less than $50,000 with a principal that has marginal credit.
If you have a small performance bond and been declined, keep in mind that you may have options, including a co-indemnitor. Contact Surety 1 if you are in need of a performance bond.