If you are a contractor in the public works arena, you have probably been asked to provide a bid, performance, and/or payment bond. For those who have not, or those looking to establish a bonding relationship, it can be a time consuming and sometimes overwhelming process. Often times a contractor is asked to put his/her personal and business life on paper for underwriting. Here are some questions we get asked frequently, along with answers to help manage your expectations:
Do you really need all this info?
Yes, we do. We do not like wasting anyone’s time and making more work for ourselves so if we ask for certain documentation we do really need it for approval.
How long does it take to get approved?
This depends on the size of the bond and qualifications of the contractor. Rule of thumb – if you have excellent credit and the bond is less than $350,000 approval is 1-2 days., sometimes even same day. If the request is much larger, the surety needs more information and can take just a few days to a couple weeks.
Why do you need my personal information?
Surety companies require a personal guaranty. Accordingly, bonding credit is based partly on personal credit and financial strength, which is why we require personal information.
Once I’m set up for bonding do I need to provide all this information for each bond?
No, just the normal account updates. This again depends on the contractor. Typically, once a contractor is set up for bonding, the surety only requires updated financial information quarterly or semi-annually, along with personal information annually. The only day to day information we’d need is a bond request form, which summarizes what job the surety is bonding.
Can I increase my bond limit after completing a couple jobs?
This is a common misconception and the answer isn’t an easy yes or no. Completing bonded jobs alone will not increase your bond capacity. Completing bonded jobs profitably and reflecting that to the surety can increase bonding capacity. Bond capacity is based on a multitude of factors so while completing bonded work is definitely a feather in your cap and provides a certain level of comfort, that alone will not increase your bonds. If you are interested in growing your bond program, as opposed to only needing the occasional small bond request, you should consult with your agent and develop a plan.
Does it cost anything to get set up?
No, just your time. Before completing any applications, if you are unsure of what you need we recommend you give us a call first. Based on a quick consultation we can offer you a solution to the best course of action.
We hope this helps you navigate through some of the general questions about bonding. If you have any questions call us. We love talking bonds.