How are Contractors who need Surety Bonds evaluated?
What is the charge/fee for a bid bond?
What is the charge/fee for a performance bond?
What is a License or Permit Bond?
What is a Surety Bond?
What is a Contract Bond?
What is a Bid Bond?
What is a Performance Bond?
What is a Payment Bond?
What is a bond program?
Will I need to provide this information every time I need a bond?
Will you bond me if I have poor credit?
Will you bond me if I lost money last year?
What do bonding companies look at on my business financial statement?
How large of a job can I bond?
What is the Miller Act? What are Miller Act Bonds?

How are Contractors who need Surety Bonds evaluated?
The Surety industry evaluates three basic factors, know as the three "C's".They are:
1. Character: does the Principal's record suggest good character, that he or she will be faithful to their obligations?
2. Capacity: does the Principal have the skill, experience and knowledge necessary to perform his or her obligations?
3. Capital: does the Principal have the financial wherewithal to support or finance the completion of the project?

What is the charge/fee for a bid bond?
Bid bonds are free and are provided to the contractor as a service by the bonding agency.

What is the charge/fee for a performance bond?
Performance bond rates are based on the three "C's". The highest rate can be 3% of the contract amount. The better the three "C's" the lower the rate.

What is a License or Permit Bond?
A bond which is required as a condition of receiving a License to engage in a certain business or as a condition of receiving a permit to exercise a certain privilege. The bond guarantees that the Principal will perform his or her obligations under the license or permit. These bonds are designed to protect the general public as well as the Government agency issuing the permit or license. License or Permit bonds are required from businesses as well as individuals.

What is a Surety Bond?
A written agreement whereby one party, called a Surety, makes promises or guarantees on behalf of another party, called a Principal. In the agreement, the Surety makes these promises or guarantees to a third party called the Obligee.

What is a Contract Bond?
Where one party (Principal) has been awarded a construction or supply contract with a condition that a bond from a Surety will be given to guarantee to the Owner (Obligee) the performance of the Principals obligations under the contract.

What is a Bid Bond?
A bond given to a Federal, State, County or Municipal Government agency at the time of a bid which guarantees the good faith of the Contractor (Principal), i.e. that if the Principal is awarded the contract the Principal will enter into the contract and post the required Performance and Payment Bonds. Bid bonds are typically required only as a percentage of the Principal's bid, usually 5%.

What is a Performance Bond?
The Performance Bond follows the bid bond if the Principal (Contractor) was deemed low bidder and is awarded a contract. The Performance Bond guarantees that the contractor will complete the contract in accordance with the terms, conditions and specifications of the contract. The Performance Bond is required as a condition of being awarded the contract.

What is a Payment Bond?
A Payment Bond is usually required as a companion to the Performance Bond. The Payment Bond guarantees that material suppliers and direct labor suppliers will be paid. Though Payment bonds are typically separate documents they are issued for no extra charge, when required.

What is a bond program?
A bond program is the single job limit, aggregate limit, and rate we set for you each year. Sometimes if the contractor isn't of great financial strength we may not set a bond program but will work with the contractor on a bond by bond basis.

Will I need to provide this information every time I need a bond?
Every year we reevaluate your program. We consider what size bonded jobs you have done with us and how they went. We also get a Business financial statement, Bank reference letter, Work on hand, certificate of insurance, and a personal financial statement from you every year. We expect this information in our office approximately 90 days after your fiscal year end.

Will you bond me if I have poor credit?
We can look at the other underwriting information. Sometimes we will write the bond but have all contract funds go through and escrow company. There is an additional fee for this but it allows us to write the bond for you. We will also look at taking collateral in the form of an Irrevocable Letter of Credit (ILOC). You will need to get the ILOC from your bank. Typically they charge for this. The ILOC must be on our form or approved by the surety company prior to writing the bond.

Will you bond me if I lost money last year?
Surety companies don's like to see contractor's lose money. If you still have adequate equity in the company and have a good explanation of why you lost money, there is a chance we can do something for you.

What do bonding companies look at on my business financial statement?
We look at what level of statement wether it is a compilation, review, or audit. Audit being the best. We look at how revenues are recognized. The preferred method is % of completion method. We then evaluate what your working capital is which is current assets - current liabilities. Keeping in mind that we don't give you dollar for dollar on all items. Then we evaluate what your equity is in the company and your debt to equity ratio. The more equity you have the better and a we like to see a debt to equity ratio of at least 3:1. We then look at what your total revenues were for the year and how much you made on those revenues.

How large of a job can I bond?
This depends on your working capital, equity, debt to equity, last years revenues, and largest previous job either bonded or unbonded. We like to see at least 10% working capital of the job size. Debt to equity of 3:1. Revenues considerably greater than the job size. Typically we will go as high as 150% of your largest previous job.

What is the Miller Act? What are Miller Act Bonds?
The Miller Act, enacted by Congress in 1935, requires that any contractor performing a Federal Construction contract post a Payment Bond along with their Performance Bond. This ensures that all Federal buildings and properties remain free of liens filed by unpaid suppliers of materials and direct labor.