A contractor’s bonding capacity is an essential part of their business. It is the highest dollar amount that a contractor is approved for when it comes to bonding with a particular surety. Why is this amount so important? It specifies the biggest job that a contractor is able to bid on when a surety bond is required.

If you are looking to increase your bonding capacity, to grow your business and be able to win larger projects, you must show that you are a secure risk financially. Then you can take your bonding capacity to a higher level.

Develop Trust with Your Surety Partner

As with any business relationship, the first step for a contractor to establish a better bonding capacity and gradually increase it begins with trust. The main concern for a surety when it comes to supplying a contract bond is that the contractor will end up defaulting on the project, which results in a bond payout. Understanding this concern, you can begin to build trust by showing the surety partner your business is organized and you communicate well. An example would be to provide well-organized documents promptly to the surety underwriter when they are due. Late or incomplete documents are a sign that approving a bond could be a mistake.  

Manage Your Finances

In contract bonding, not only do sureties need to see that it is unlikely you will need a bond payout, they also need to know you have the means to repay a claim if one does occur. For you as a contractor, this means you need a combination of low debt and strong credit, as well as the ability to remain solvent even if a repayment occurs. To grow your bonding capacity, it is essential for you to improve your finances, especially tangible assets. In the construction business, cash is king; and the more you have at your disposal, the better.

Expand Your Project Portfolio

When you have diverse, successful projects in your portfolio, it reduces the level of risk that a surety partner perceives. A lack of experience in an industry or being new to bonded projects is more likely to result in a bond claim, and sureties are highly aware of that potential danger.  

They want contractors who have experience in the size and type of project the bonding needs. Start on a small scale in a new project field and make certain the project is a success. This shows the surety that you can work your way into new types of expertise without a significantly increased risk. NSSI can help you learn how to improve your bonding capacity.

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