How does a surety evaluate a prospective client for a standard bonding program?

The surety looks at the client’s credit, capital, and capacity (the three C’s). This is a credit relationship and the surety wants to know that you can do good work and pay your bills. Here’s how it works:

  1. The prospective company’s Credit (Dun & Bradstreet or Experian generally) and also the owner(s) personal credit as this may be an indication of pay record.
  2. Capital is shown on financial statements. They look at Balance Sheets, Income Statements, and aging of Accounts Receivables to determine equity and liquidity. The bigger the bond request, the stronger the balance sheet should be.
  3. Capacity to do certain projects will depend on your experience. There may be reference checks, questions about your estimating process, project manager resumes, current work on hand, and a discussion of how you’d approach a project may come into play here.

With this information, the surety evaluates surety creditworthiness and the size of the surety program parameters.