Contractors Seal of Approval is His Surety Bond

A Surety Bond Is a Contractor’s Seal of Approval

In today’s market, a surety bond is a valuable commodity for a contractor. Obtaining a surety bond shows your company’s best face to both potential customers and lending institutions. That’s because a surety bond amounts to a seal of approval from an independent third party, the surety bond company, which has evaluated your work. The surety bond that the surety company issues shows that it believes in your ability to perform.
In addition to providing an endorsement of your abilities, a relationship with a surety underwriter and bond producer offers other advantages. These professionals have access to a variety of resources. They interact with a cross-section of the construction industry and can assist the contractor in finding construction accountants, lenders and attorneys.
For contractors involved in private construction, having these surety relationships in place can sometimes mean the difference between bankruptcy and solvency. For example, many contractors have faced bankruptcy because they did not verify the project owner’s funding. The surety bond company will usually request the name of the funding source and then validate the adequacy of funds before it will commit to bonding a project. They will also review contracts to identify terms, general condition requirements or irregularities in the specifications or bond forms that may add unnecessary risk.
The surety industry wants to help new and emerging contractors obtain their first bond and increase their bonding capacity. If you are one of these companies, here are some resources that can help you:
· The Surety Information Office (SIO),, provides free information and materials for contractors who want to learn more about the use of surety bonds in public and private construction.
· The Surety and Fidelity Association of America (SFAA),, has developed a Model Contractor Development Program to educate contractors about surety bonds and help them to become bondable. Information on this program can be found in the “Development and Diversity” section of the SFAA’s Web site.
In addition to these resources, the Small Business Association’s (SBA’s) Office of Surety Guarantees ( has helped contractors who have the necessary knowledge and skills, but don’t have the experience and finances to obtain a bond through traditional sources. The SBA guarantees the bid, performance or payment bond issued to the contractor, and reimburses the surety a percentage of loss if the contractor defaults. This government guarantee allows sureties to write bonds for contractors who would not otherwise meet their minimum standards.

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