Every week we get inquiries regarding clients who need their very first bond. This is a great question and one we love to answer. It is particularly gratifying to give a new client their first bond – of many!
There are different paths forward depending on the circumstances. Each door has different aspects. Let’s go over them.
Door Number 1:
Use this door for contracts (federal and all others) up to about $500,000. This is the fastest / easiest program with the first bond approval coming over in about 1 day! Only a one page application is needed – no financial statements. The program is predicated on the work being simple and normal for the contractor, and personal credit reports of owners and spouses must be acceptable.
This door is perfect for companies that are not pursuing contracts in excess of $500,000. Other applicants can also use it as a quick way to start while completing the application process for higher amounts.
As with all the doors, there is no charge to get pre-qualified for bonding!
Door Number 2:
This is for contracts from $500,000-7500,000. Similar to Door Number 1, but now add “in house” company financial statements and/or tax returns. A longer questionnaire is needed, and supporting documents such as resumes, references and personal financial statements may be required.
Door Number 3:
For contracts in the $750,000-1,000,000 range, plan on a CPA prepared Compilation financial statement. This is the lowest level (least expensive) CPA financial report. It is needed once per year.
Door Number 4:
Contracts over $1-2 million may require an annual CPA Review financial statement.
Number 5 (fancy!):
For large contracts in excess of $10 million, a CPA Audit may be required by the underwriters.
It makes sense that as the obligations become larger, higher quality, more complete information is needed.
Is there some flexibility? Sure! It may not seem so, but underwriters are motivated to be flexible and find ways to write the business. After all, no bonds = no revenues. They must find ways to say yes.
FIA Surety is a NJ based bonding company (carrier) that has specialized in Site, Subdivision, Bid and Performance Bonds since 1979 – we’re good at it! Call us with your next one.
Steve Golia, AVP: 856-304-7348