Contract Bond Line

[Numbers]

How does a contractor bond line work?

[marietta68]

How does a contractor bond line work?

The surety company analyzes the finances and history of the firm and sets an amount for the total liability it's willing to extend on behalf of the contractor. Unless it's a collateralized account, there's a fair amount of flexibility in the limit based on job characteristics (for example, how long for completion, in or out of contractor's usual territory) and incomplete work on hand, both bonded and unbonded. The agent and underwriter review job status on a regular basis to determine outstanding liability and as jobs are completed, it opens up additional capacity. This is a very superficial overview of the process, but you can compare it to the limit set for your Visa card. It's subject to periodic review and if handled well, Visa will keep your account open and might even increase your limit.

[Surety Queen]

How does a contractor bond line work?

There are some options for bond lines. If you are a new company just starting out, there is the Fast Track program. This program allows you up to $200,000 of bonded work at any one time. You could do one project at $200,000 or numerous jobs that don't exceed the $200K limit. This program is designed specifically for new companies to allow them to enter into the bonding arena. If your personal credit is good, and you do the type of work that qualifies for the program, you can should be approved.

After your first year of business, if you can produce solid business financials, then this line can be increased to $200,000 for single jobs with a total aggregate of $400,000.

After a few years of business - when you can show experience and profitability, you can apply for a larger bond line.

If you are interested in the Fast Track program, please feel free to visit the following link: Bid Bonds - Surety Bond Types