There are hundreds of types of bonds…probably even thousands. And in the contract world, in which the bonds guaranty a specific contract with specific obligations, there are surety companies with different appetites. Some of the bonds include bid bonds, performance and payment bonds, and warranty bonds. Sometimes the challenge lies in working with an agent that understands the surety marketplace. That is, they know which surety to send a specific bond request to ensure the best possible fit. For this blog we’ll just focus on contractors that operate in the public works arena. Here are just a few of the considerations a surety professional makes when faced with a new bond request or new potential client:
- Multiple bond needs vs “one-off” – Some surety companies are not interested in bonding a contractor with a small “one-off” bond need. That is, a contractor that isn’t going to need any additional bonds going forward. Other surety companies deal in the “one-off” capacity all the time.
- Size of the bond – Is it a small bond that can be approved quickly simply based on a credit or will it require much more information?
- Poor credit vs good credit – While all surety companies require a certain level of credit worthiness, some are more stringent than other companies with respect to prior bankruptcies, recent past dues, etc.
- CPA statements – Many contractors that haven’t needed bonding or banking relationships do not have CPA prepared financials. There are surety companies that are more willing to work with internally prepared financials than others.
- GC or Sub? – Believe it or not some surety companies prefer working with one or the other.
- Type of sub – Some surety companies will not touch an environmental contractor, for example, while that may be another surety company’s niche.
- Size of contractor – The size of the contractor has a lot to do with what surety market is the best fit. Some surety companies have potential minimum revenue standards to consider, or minimum equity levels required of its clients. Other surety companies specialize in working with small contractors and cannot handle larger needs.
These are just some of the considerations but as you can see, it’s important to work with agent that has several surety appointments. At Surety1 we are appointed with over 20 surety markets so when we get a submission, there is always at least 3 or 4 that fits your business. This ensures the best possible rate, terms, and service for your bonding needs. If you have any bond needs or questions we are hear to assist.