HOW SURETIES EVALUATE CONSTRUCTION CONTRACTORS, WHAT THE UNDERWRITER IS ACTUALLY LOOKING AT.
Most contractors think bonding capacity comes from revenue and years in business. Underwriters think in three categories: character, meaning a completion history without disputes, capacity, meaning the technical and operational ability to execute, and capital, meaning the financial position to absorb a loss. Capital is where most bonding problems live, and capital gets read off the financial statements and the WIP rather than off revenue. A contractor who understands how the underwriter reads the file can build the financial infrastructure that moves the capacity ceiling.
The file you submit is the only view of your company the underwriter gets. He isn't walking your yard or watching your crews, so a well run business with sloppy reporting reads as a risk and an average business with clean monthly reporting reads as safe. That's not fair, and it's also cheap to fix. Monthly WIP from closed books, a current balance sheet, and a documented list of finished jobs cost nothing but discipline, and they're the difference between a contractor who gets the limit he asked for and one who gets a counteroffer.
WHAT IT MEANS.
Surety underwriting is an assessment of a contractor's character, capacity, and capital, priced against the risk that a bonded project doesn't get finished.
The underwriter reviews a specific set of documents, and each one tells him a specific story. Current financial statements, meaning income statement, balance sheet, and cash flow statement for the most recent fiscal year. The WIP schedule, showing all active projects with contract value, percent complete, billed to date, earned to date, and projected final cost. Backlog, meaning signed contracts not yet started or still in progress. Reference projects of similar size and type to the bond being requested. A bank letter confirming line of credit availability and the current draw status. An insurance certificate with general liability and workers comp limits and expiration dates.
WIP is the central document in that stack. A surety is underwriting the risk that a project doesn't get completed, and the WIP tells the underwriter how you're managing 8 to 12 projects at the same time right now. A WIP that shows consistent overbilling positions, projects that look profitable the whole way and then produce a loss at closeout, and cost to complete estimates that never move tells him you're managing cash through billing rather than managing projects through financial control. That contractor gets lower limits and worse rates even when the balance sheet looks strong.
CHARACTER, CAPACITY, AND CAPITAL, IN THAT ORDER.
Character, read from completion history and references
The first question is whether this contractor has a history of finishing projects without disputes, claims, or defaults. It gets assessed from your completion history and from the people who will vouch for it. Character doesn't have to be perfect to underwrite well, but it does have to be documented, because an underwriter can't give you credit for a clean record he can't see.
Capacity, read from project history and the equipment list
The second question is whether you have the technical ability, the crew, the equipment, and the management to execute the size and type of project being bonded. It gets assessed from your project history and your equipment list. A contractor asking to be bonded well above anything he has completed before is a capacity question before it's ever a money question.
Capital, read from the financial statements and the WIP
The third question is whether you have the working capital, net worth, and debt structure to fund the project through completion if something goes wrong. It gets assessed from the financial statements and the WIP. Most bonding problems are capital problems, which means the financial position doesn't support the limit that was requested, and revenue has almost nothing to do with the answer.
WHAT IT LOOKS LIKE IN DOLLARS.
For an established contractor with a strong relationship, financials produced in house plus tax returns filed by your CPA are often enough for a $2M single project bond. For a new surety relationship or a higher limit, CPA reviewed statements produce faster approvals and more capacity. That upgrade runs $3,000 to $6,000 annually, and it typically pays for itself on the first large project that wouldn't have been bondable at the old limit.
WHAT CHANGES THE UNDERWRITING OUTCOME IN YOUR FAVOR.
Monthly, from closed books, by the 15th. Not when the surety asks for it and not once a year at renewal. An underwriter who receives unsolicited monthly WIP from a contractor sees that contractor differently than one he has to chase for it.
Every completed project from the last 3 years with final contract value, completion date, and outcome, meaning on time, under budget, and no disputes. This is the character piece of the file. It doesn't need to be spotless, it needs to be written down.
Not the one from 9 months ago. The balance sheet at the time of the bond application should reflect current AR, current cash, and the current line of credit draw. If you collected AR since the last statement, show it. The underwriter decides on the financial picture in front of him the day he reads the file.
Your agent is the one presenting the file to the underwriter. An agent who knows your business, understands your capacity, and can answer underwriter questions without calling you first is worth more than a better balance sheet presented by an agent who doesn't know you.
We produce the financial package sureties want to see, and we produce it on the same cadence every month whether a bond is pending or not. Contractors running on CFOS for 12 months or more have the documentation infrastructure surety underwriters trust, which is most of what separates a strong file from a thin one.
THE OUTPUTS, NAMED.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
FREQUENTLY ASKED.
