United States
Hong KongBuilding a bonding relationship
Sureties assess capital, capacity and character. Bondability is built over time with clean financial statements, completed projects of increasing size and a consistent record, rather than obtained on demand.
Bonding is not a product you buy when you need it. It is a relationship you build before you do.
The three Cs of surety
| C | What is assessed |
|---|---|
| Capital | Net worth, working capital, the strength of the balance sheet |
| Capacity | Whether you can actually perform work of this size, given your record |
| Character | Track record, references, how you have handled problems |
All three, and capacity is the one contractors underestimate. A strong balance sheet does not persuade a surety you can build something twice the size of anything you have completed. Start early.
A bond is not insurance
If the surety pays out, it seeks recovery from you. You will sign a general indemnity agreement, often personally and often including a spouse.
It typically gives the surety broad rights, including access to your books and the ability to settle claims without your agreement. That is normal and it is also a serious commitment worth understanding before signing.
How to become bondable
- Keep proper financial statements, prepared by an accountant
- Complete projects on time and settle disputes without litigation where possible
- Grow project size gradually rather than in leaps
- Maintain working capital rather than distributing every dollar of profit
- Build a relationship with an agent who specializes in construction
Why the state cares too
License bonds are separate from contract bonds and are usually required for licensure. Being bondable at all is often a condition of holding the license.
Start early
A surety wants to see a history. Approaching one for the first time with a large project in hand is the worst moment to begin the conversation.
Common questions
What do sureties assess?
Capital, capacity and character - the balance sheet, whether you can perform work of this size, and your record.
Is a bond insurance?
No. If the surety pays out it seeks recovery from you under a general indemnity agreement.
What is a general indemnity agreement?
A broad commitment giving the surety rights including access to your books and the ability to settle claims. Read it before signing.
How do I become bondable?
Proper financial statements, completed projects, gradual growth in size, retained working capital and a specialist agent.
When should I start?
Before you need a bond. Approaching a surety with a large project in hand is the worst time to begin.