Performance Bonds USA

What are the main criteria used to determine if a company is bondable?

There are two main criteria. For projects under $750K, a good personal credit score of the owner is a determining factor. For a company that performs larger projects, sufficient working capital is the primary measure. That said, there are many other determining factors.

How do surety underwriters determine the maximum size bonded project a company can bid?

Typically, underwriters do not like to approve a bond for a project that is more than twice the largest project the construction company has performed in the past. Slow company growth has proven to keep construction companies financially stable.

How long is the approval process for getting a bond?

It varies. For projects under $750K, the turn-around time can be as little as one day. For projects greater than $750K, the turn-around time can be a week or more, much like getting a home mortgage.

What information is required to get a bond?

For projects less than $750K, a simple one-page application is required. For projects over $750K and up to $1MM additional financial information is needed. For projects $1MM+, a full submission is usually required, including financial statements (company and personal), tax returns, a work-in-progress report, and much more.

What happens to cause a claim against a bond?

Generally, a claim against a bid bond (usually 10% of the bid amount) can be placed against a bond if a company is the low bidder but chooses not to enter into a contract with the owner. This is rare, because the company would likely never get a bond again.