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How to Get Bonded
as a Subcontractor

Understand bid bonds, performance bonds, and payment bonds. Learn the 5-step process to get bonded and what surety companies look for.

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Bid Bond
Guarantees you'll enter into a contract if your bid is accepted and you'll obtain a performance bond.
When needed: When you submit a bid on a project
Cost: 0.5%-2% of bid value
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Performance Bond
Guarantees you'll complete the work according to contract specs. If you don't, the surety company will hire someone else to finish.
When needed: Required to start most jobs
Cost: 1%-3% of contract value
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Payment Bond
Guarantees you'll pay your suppliers and workers. Protects GCs and the project owner if you fail to pay.
When needed: Often required alongside performance bond
Cost: 0.5%-1.5% of contract value

How to Get Bonded: 5-Step Process

Step 1: Choose a Surety Company

Find a surety company that works with your trade and size. Not all sureties work with small subs. Ask your trade association for recommendations or search online for "surety companies for [your trade]."

  • National sureties: Zurich, Great American, Cincinnati Insurance, CNA
  • Regional sureties: Work in specific states or regions
  • Specialty sureties: Focus on specific trades (electrical, plumbing, etc.)

Tip: Contact 2-3 sureties to compare rates and application requirements.

Step 2: Gather Financial Documents

Surety companies underwrite you based on your financial health and history. Have these ready:

  • Personal and business tax returns (3 years)
  • Profit & loss statements (3 years)
  • Bank statements (last 6 months)
  • Balance sheet
  • Proof of workers comp and GL insurance
  • List of current and past projects (with GC references)
  • Your credit report (or be ready to explain credit issues)

Be honest: If you have financial issues, address them upfront. Sureties talk to credit agencies.

Step 3: Complete the Surety Application

The application asks about your company, experience, financial condition, and risk profile. Most applications take 1-2 hours to complete.

  • Company history and structure (sole prop, LLC, etc.)
  • Years in business and experience
  • Key personnel and their experience
  • Trade background and certifications
  • Equipment and resources
  • Safety record and workers comp claims history

Tip: Be detailed and thorough. Vague or incomplete answers slow down approval.

Step 4: Surety Underwriting

The surety company reviews your application, financial statements, and background. They'll call your references (past GCs and clients) to verify your work quality and payment history.

Timeline: 3-10 business days depending on application quality and any gaps.

The surety will contact you if they need clarification on anything. Respond quickly to speed up approval.

Step 5: Get Approved & Issue Bonds

If approved, the surety issues you an account and establishes your bond limit (total amount you can be bonded for at one time).

  • You'll get a certificate of bonding authority
  • Each project will have a specific bond amount (bid, performance, payment)
  • You pay a premium to the surety each time you issue a bond
  • Bonds are active for the duration of your contract

Example: If approved for a $500K bond limit, you can have $500K bonded at one time. As projects finish, capacity opens up.

What Surety Companies Look For

Financial Health
Positive cash flow, profits, and growing revenue. They want to see you can afford to complete projects if claims happen.
Experience & Track Record
Years in business (3+ preferred), successful project history, and references from GCs and clients.
Credit History
Good personal credit (usually 650+) and business credit. Late payments, liens, and lawsuits hurt your chances.
Safety Record
Low workers comp claims history. High claims or unsafe work practices signal higher risk.
Insurance
Active GL and workers comp insurance with adequate limits. No lapsed coverage.
Key Personnel
Experienced owner/project manager. Sureties assess if key people have the skills to manage projects.
Capacity & Resources
Enough equipment, crew, and working capital to handle the job size. You can't bid $2M projects if you have a 3-person crew.
Project Control
Clear policies for hiring subcontractors, managing budgets, quality control, and safety.

Bonding Cost Breakdown

Bond Type Cost (Premium) Example: $100K Project
Bid Bond 0.5% - 2% of bid amount $500 - $2,000
Performance Bond 1% - 3% of contract value $1,000 - $3,000
Payment Bond 0.5% - 1.5% of contract value $500 - $1,500
Total (All Three) 2% - 6.5% total $2,000 - $6,500

Note: Rates depend on your financial strength, experience, and project risk. Established subs with strong financials get better rates. Newer or riskier subs pay more.

Getting Bonded: Quick Tips

  • Start early: Bonding takes 1-2 weeks. Don't wait until you win a bid.
  • Get pre-qualified: Know your bond limit before pitching bids to GCs.
  • Build relationships: A good surety agent becomes a business advisor. Treat them like a partner.
  • Pay premiums on time: Late payments damage your credit and surety relationship.
  • Report issues: If a project hits problems, tell your surety early. Surprises cause problems.
  • Keep financials clean: Good bookkeeping and accounting records speed up future applications.

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