Even though most surety companies are also large insurance companies, qualifying for bonds is more like obtaining bank credit than purchasing insurance. Like a bank, a surety company wants to know you well before committing its assets.
Most contractors find that it is necessary to spend a lot of time and effort establishing their first relationship with a surety company. Since the surely is guaranteeing your company's performance, it needs to gather and carefully analyze much information about you and your firm before it will agree to provide bonds.
Contract Surety Prequalification
Before issuing a bond, the surety must be fully satisfied that the contractor is of good character, has the experience that matches the requirements of the projects to be undertaken and has, or can obtain, the equipment necessary to perform the work.
The surety also wants to make sure the contractor has the financial strength to support the desired work program and has a history of paying subcontractors and suppliers promptly. It will want to see that the contractor is in good standing with a bank and has established a line of credit.
In short, the surety wants to be satisfied that the contractor runs a well-managed, profitable enterprise, keeps promises, deals fairly and performs obligations in a timely manner.
It is important to realize that each surety company has its own underwriting standards and requirements. But there are fundamentals that are common to underwriting surety bonds, and understanding these fundamentals is helpful to a contractor seeking surety bonds for the first time.
If you understand what's involved in getting bonds, you can weigh the time and expense of obtaining surety bonds against the benefits of being able to take on bonded projects. Your decision to seek surety bonds should be based on long-term considerations. To obtain bonds, even some changes in the way your firm does business may be necessary, and these changes could have certain costs.
Here is What you will need: