


June 8, 2021
Construction Industry Experiencing COVID-19 Side Effects?
District Bonding Publications Is the Construction Industry Experiencing…

Here is what to consider when building Bond Capacity. If you’ve ever applied for a bank loan, or even purchased a nice piece of a jewelry from a jeweler, you’ve probably heard of “The 3 Cs.” The bonding industry also has its own version of “The 3 Cs.” They’re not cut, carats or clarity, and answers to the following common questions may help contractors with growing their bonding programs.
Character, as defined by Oxford Languages, is “the mental and moral qualities distinctive to an individual.” From a surety perspective, character is a combination of your personal history, personal credit and the company’s reputation in the community you serve.
When underwriting capacity, bond companies typically like to support contractors that have performed similar work in the past. The rule of thumb is that bond companies will consider bond requests that are 1.5 to two times the contractor’s largest completed project.
The third and final C, capital, is the financial resources contractors bring to their desired bond program. While a bond company may be able to overcome a jump in job size or a personal credit issue, the ability to cash flow and manage a project makes this C the most critical.
A healthy relationship between the contractor, the bond broker and the surety underwriter is vital to helping establish or grow bonding capacity. Be prepared to answer detailed questions and subject the company to a little more scrutiny than it may be used to. However, communicating with the agent and the surety can be incredibly helpful toward building your bonding capacity.
District Bonding Publications Is the Construction Industry Experiencing…