Date Published: April 25, 2023

Growing any business is not easy. Growing a construction company is particularly difficult.  One item that needs to grow with the company if it performs public works projects, is the amount of available surety bond credit.  A lack of surety credit is a constraint to growth.  Performance and payment bonds are the life blood of a public works contractor. Virtually all public works and private projects require performance and payment bonds; a strong bonding relationship is essential for success and profit. Having the opportunity, man-power, and financial resources may not be enough. Chances are, success of the company may depend on your bonding company. The following are 5 proven ways increase surety bond credit. 

1. Hire the Right CPA Firm

When first entering public works, small bonds may not require CPA prepared financial statements. As job sizes increase, the underwriting requirements of the surety increase as well.  One important change will be the need toIncrease Surety Bond Credit have financial statements prepared by a CPA. Not all CPA’s are created equal. Construction poses some unique accounting issues that not all accounts are qualified to address. A financial statement prepared by a construction oriented CPA firm will go far to maximize your surety credit. The financial statement is the basis for all surety credit decisions. A financial statement that the surety company can rely on is essential.  To find a good construction CPA, reach out to the Construction Financial Management Association, or some other construction related organization. Having a CPA prepared financial statement at fiscal year end prepared by a construction oriented CPA firm will add a level of confidence int he numbers presented to the underwriters and will increase surety bond credit. 

2. Develop a Written Business Plan

Show an added level of business acumen by preparing a written business plan.  Surety company representatives are not construction professionals. They have to rely on intangible information to make credit decisions. A written business plan that is both realistic and detailed shows that you have given thought to growing the company. You have identified the potential pitfalls and how you plan to manage them.  You have outlined your key personnel, strengths, weaknesses and opportunities. The U.S. Small Business Administration has a free business plan tool available online. Paint a picture of where the construction firm is heading and increase surety bond credit. 

3. Obtain A Working Capital Line of Credit

The worst time to go to the bank for a loan is when you actually need one. Obtaining a strong bank line can increase your surety credit because it shows you have the ability to raise cash should you need it. The surety does not want to liable for a bond claim.  A good working capital line of credit can go a long way to easing the concerns of the surety.

4. Keep Money in Your Company

Ever heard the saying cash is king? There is a reason for that. A contractor  may get conflicting the conflicting advice from his business advisers. The attorney may advise take money out of the company, shield it from corporate liability; the banker wants the company to constantly utilize the bank line. A surety bond underwriter loves to see cash in the company.  Keep cash in the company, use your bank line sporadically, if at all, while still paying your bills on time to increase surety bond credit. 

5. Hire an Agent that Specializes In Surety Bonds

There are lots of insurance agents who specialize in bonds. Do yourself a favor, let a general insurance agent do what insurance agents do best: write insurance. Surety bonding is a totally different product than insurance. Insurance is a risk transfer product, while surety bonding is a financial guarantee.  You would not go to your dentist to have open heart surgery, even though they are both doctors. An agent who does not fully understand the surety product can ruin your chances of increasing your bonding credit. A surety bond specialist will pre-qualify and consult with you prior to sending paper to the surety. The surety specialist will  make a complete submission, identify the potential issues and provide a solution for those issues to the surety company. Just forwarding paper over to the surety company often leads to an unnecessary failure.

More Articles on Performance bond Underwriting

About the Author

John Page started his surety bond career in 1987. He was a vice president of a top ten surety bond company prior to founding is a service of AssuredPartners one of the largest and fastest growing insurance agencies in the nation. Representing over a dozen surety bond companies, is the premier online provider of surety bonds nationwide since 2003.

Oregon contractor license bonds are increasing by $5,000

How to Get Bonded

1. Apply Online
Using our Free & Secure Application
2. Get Your Free Quote
Applications are No-Obligation
3. Get Your Bond
Most Bonds are Approved in 1-2 Business Days

Surety Bond Experts

Surety1 was founded in 2003 and helps thousands of clients find the best prices on their surety bonds. We take pride in our work so that we can give you great service. Learn more about Surety1.

Get started with the bond application process today.

Most bonds are fully processed within 1-2 business days. In some cases, you'll hear back from Surety1 within hours!