Maximizing Bonding Capacity: A Guide for Contractors

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Where does your construction contracting firm stand? Have you assessed your bonding capacity? Bonding capacity is an important issue for contractors because it determines which construction projects they can pursue or bid for. Discover new ways to increase your firm’s bonding capacity to bid for the projects you want.

  • Understand your financial position: As a contractor, understand your true financial position as the surety sees you. Working capital, total net worth, balance sheet, and fiscal year- end financial statements will provide you more information about your firm’s financial strength.
  • Work with your CPA: To increase your surety limits, work closely with your certified public accountant (CPA) or financial adviser, who’s focus is construction, on preparing financial statements and tax planning.
  • Improve your credit score: If you don’t know your credit score, it’s time to find out. A good CPA or financial adviser will help you improve your personal and firm’s credit score.

A surety company always analyzes the financial stability of a contractor, such as cash flow, capital, and bank relationship, before issuing a surety bond. Since surety bonds secure contractors on construction contracts, surety bonding companies thoroughly review their financial statements and bonding capacity. Maximize your bond limits to increase opportunities for getting surety bonds.