Date Published: January 6, 2021

A contractor goes to his or her insurance agent in need of a performance bond and the insurance agent tells them “you do not qualify because of your credit”. Obtaining performance bonds with bad credit, while a bit of a challenge,  can often be obtained through a professional surety bond agency like Surety1.

The Performance Bond Underwriting Process

The underwriting process for performance bonds is intense. The surety must be confident a contractor can successfully complete a project and pay its sub-contractors and suppliers. According to the Surety Information Office:

What Surety Professionals Analyze

Financial Strength Ability to Perform Reputation With
  • Annual & interim financial statements
  • Investment strategies
  • Cost control mechanisms
  • Work in progress
  • Cash flow
  • Net worth
  • Working capital
  • Bank & other credit relationships
  • Prior experience on similar projects
  • Equipment
  • Personnel
  • Past, current, and future workload (bonded & non-bonded)
  • Continuity plan
  • Organization
  • Management plan
  • Project Owners
  • Subcontractors
  • Suppliers
  • Lenders

These fundamentals must be present, regardless of the credit history. Performance bonds with bad credit may be obtained, assuming the above parameters are met.

Tools used to obtain Performance Bonds with Bad Credit

One tool that may be available is the SBA Bond Guarantee Program. Since the early 1970s, the Small Business Administration (SBA) hasperformance bonds with bad credit operated its Surety Bond Guarantee Program, which provides surety bond companies with partial repayment against loss stemming from bonds they would not normally provide. As a result of this guarantee, a surety may be willing to provide bonding that a contractor would not otherwise qualify for due to credit issues.

Another tool a surety may consider is called Funds Control or Contract Administration. With this tool, a third party receives the funds from the oblige (party requiring the bond) and pays all the subcontractors and suppliers. This tool reduces the credit risk to the surety and may make issuing performance and payment bonds more palatable to the surety.

Collateral may also be an available tool for obtaining performance bonds with bad credit. In this case, the surety will hold collateral, usually cash or a letter of credit from a lending institution. Usually the surety will want to see the collateral obtained from funds outside of the construction company.

It is not entirely unheard of for a surety to require a combination of the above tools. Collateral and contract administration is a tried and true combination for many surety underwriters. Funds control and the SBA guarantee are also not an un common combination.


Just because you may have been turned down for bonding does not necessarily mean you are not bondable. A surety professional agency can often succeed where the generalist insurance agents fail. While obtaining performance bonds with bad credit create an additional challenge, it is far from an insurmountable issue to overcome. To speak with a surety bond professional, contact Surety1 toll free at (877)654-2327 or email

Surety1 is a service of AssuredPartners, one of the nation’s largest and fastest growing insurance agencies. Surety1 is a bond only agency providing all types of surety bonds nationwide since 2003. 


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!