Not every bond request is a sure thing, and dealing with a rejection at the last minute after spending time and effort putting a bid together can be very frustrating.  I’ve seen clients who poured over plans and specs and investigated every minor detail of the job but failed to give timely notice to the surety of their intentions, and even worse, have not provided the surety with updated financials in more than 90 days.  All of this can lead to a poor outcome with both sides a little frustrated.  

Attention to detail can make all the difference, which is great news for contractors: Chances are good that the bond you need is within reach as long as you’re careful with how you approach the process.  

You really can’t overcommunicate when it comes to presenting your qualifications to a surety company. The following details about your business are essential:  

Again, more communication is better. So, take the time to fully explain details that might offer valuable context about the job and how your company will approach it. For example, if a job in your current WIP schedule is experiencing profit fade, addressing questions like these up front definitely helps make your case:  

Remember, it’s not what happens to you in business (or life) that determines your fate, it’s how you react. Honesty matters, and you’re better off admitting mistakes as long as you also can describe the lessons you learned. A contractor who can finish a tough job and manage through difficult situations is battle tested and better from the experience. 

Ignoring risks or problems will not build confidence with outside creditors. 

Answering further questions will help strengthen your position:  

When you know why bond requests typically get denied, you’re in a great position to avoid those pitfalls. The main reasons are the three C’s: capital, competence, and character.  

Your underwriter needs to know you have the financial wherewith to handle the job. From a financial standpoint, that means working capital, equity, and cash flow compared to your total and projected work on hand. Will you need to purchase new equipment for the job? Buy materials in advance?  How will you cash flow the first few months without payment from the owner?  If the financial ratios don’t come close, it becomes very difficult for an underwriter to stretch for an approval. 

Make sure you can show your company, under current ownership and management, has the appropriate experience in managing  

If there’s a history of job fade in your backlog, you need to be able to show what you’ve learned and how you’re avoiding the issue going forward. Experience is only a positive if the job went well. 

Show the underwriter how you’ve followed through on past commitments your surety has requested of you. They will also want to know whether you 

Focusing on the mutual relationship aspect of surety credit will go a long way toward building the needed trust to allow for the occasional stretch. 

As unsecured creditors, underwriters require thorough analysis of all financial and business risk factors before they can be comfortable in gaining an approval. And when it comes to a stretch scenario, most underwriters will need to engage their home office—which means someone who’s less familiar with your business also needs to buy in to the approval.  

That makes your job a little harder, so come armed with especially thorough information, and make sure you allow plenty of time to give them all the details they want and to give yourself plenty of time to understand any onerous provisions in the contract.  

The more history you build with your bond company through difficult times or stretching your bond limits, the more confidence they’ll have in you going forward. Which also makes the process a little easier: Building trust means answering fewer questions the next time, and the time after that, and the next one.