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Surety Bonding

How to Obtain a Bond

Standard Surety Program

The Standard Surety Program is a term that is used for a "full submission" in which the company submits a number of financial statements, background information, personal information on all officers, owners, principals and other documents to qualify for a surety bond (either Bid Bond, Payment and Performance Bond, etc.). The Standard Surety Program is for a company that requires a bond that is more than $500,000 OR the company requires many bonds that would exceed $500,000 in total. For a list of documents to be submitted, click Documents Required here.

These documents are then submitted, together with an outline of the company, to the surety company by an agent or broker. The underwriters review all the information and, if qualified, the surety will offer a bond line or program to the company. This is referred to as a Single/Aggregate (or total) bond line or program. Click for a definition of Single/Aggregate. glossary

Once an underwriter has reviewed the information, there are a number of possible outcomes, such as:

  1. The company is declined for a number of reasons, including low credit scores, lack of capital, and/or not enough work history and experience to qualify for the bond that the company requires.
  2. The surety company approves the request for the bond or bond line with no additional terms or conditions, and the company qualifies for a standard surety rate. The surety determines the premium rate for each company.
  3. The surety company approves the bond or bond line request but only on a collateral basis. This would require the company to offer a percentage of the bond in cash, (which is held until completion of the project, plus at least 90 days thereafter, depending upon the project) to offset any risk undertaken by the Surety in exchange for the bond being issued. Click here for a definition of Collateral. Sometimes, the surety will waive collateral if the Small Business Administration (SBA) will offer support on a bond. Visit the Small Business Administration at www.sba.gov for information on SBA-backed bonds.
  4. The surety company approves the bond or bond line request but with the condition of Funds Control, whereby a third party is introduced to offset the risk of non-payment of suppliers, labor, materials, etc. Click for a definition of Funds Control.
  5. The surety company approves the request for the bond only with the condition of collateral and funds control. The Surety is attempting to minimize any risk associated with the bond or bond line.