How to Get a Surety Bond for Your Contracting Business
- Jun 5
- 5 min read
Winning contracts is one thing—qualifying for them is another. Many contractors hit a roadblock when a client or city requires a bond, leaving them wondering where to start. If you’re trying to figure out how to get a surety bond for your contracting business, you’re in the right place.
In this guide, we’ll break down what surety bonds are, why you need them, and the exact steps you can take to secure one.
What Is a Surety Bond?
A surety bond is a financial guarantee that you’ll complete a job according to the contract terms. It’s not insurance for you—it’s protection for the project owner.
A surety bond involves three parties:
Principal: You, the contractor
Obligee: The project owner (client or government agency)
Surety company: The company that backs the bond
If you fail to meet your contract obligations, the surety may step in to cover costs or losses—then they may seek repayment from you.
Why Contractors Need Surety Bonds
Many jobs require bonds before you can even bid.
You’ll commonly need a bond for:
Public construction projects
Large commercial contracts
Licensing requirements in certain states
Municipal or city permits
For example, federal projects often require bonding under the Miller Act. You can learn more about federal contracting requirements at https://www.acquisition.gov.
Beyond requirements, bonds help you:
Build credibility with clients
Compete for larger jobs
Show financial responsibility
How to Get a Surety Bond for Your Contracting Business
(Direct Answer Section)
To get a surety bond for your contracting business, you typically need to follow these steps:
Determine the type of bond required (bid, performance, payment, or license bond)
Gather your financial documents and business information
Complete a bond application with a licensed agent or broker
Undergo a credit and financial review by the surety
Receive a quote and pay the premium if approved
Working with an experienced insurance professional can make the process smoother and help you avoid delays.
Types of Surety Bonds for Contractors
Not all bonds are the same. Understanding the type you need is key.
Bid Bonds
A bid bond shows that you’re serious about a project and capable of taking it on.
It guarantees:
You’ll honor your bid
You’ll secure a performance bond if selected
This protects the project owner if you don’t complete the job as agreed.
It may cover:
Incomplete work
Failure to meet contract terms
Payment Bonds
A payment bond ensures subcontractors and suppliers get paid.
This helps prevent:
Liens against the property
Payment disputes
License and Permit Bonds
Many states require contractors to hold a bond to maintain a license.
These bonds:
Guarantee compliance with local laws
Protect the public from poor workmanship
You can check licensing requirements by state at https://www.nasbp.org for guidance on bonding and contractor standards.
What Do Surety Companies Look For?
Getting approved for a bond depends on your overall risk profile. Surety companies evaluate several key areas.
Credit Score
Your personal and business credit history matters.
Strong credit suggests:
Reliable payment habits
Lower financial risk
Lower scores don’t automatically disqualify you, but they may impact your cost and approval.
Financial Strength
Expect review of:
Income statements
Balance sheets
Cash flow
Sureties want to see that you can handle the size and scope of the project.
Experience and Track Record
Your work history plays a major role.
They’ll consider:
Years in business
Types of projects completed
References and past performance
New contractors can still get bonded, but may start with smaller limits.
Current Workload
Taking on too many jobs at once can raise concerns.
Sureties evaluate:
Existing contracts
Backlog of work
Capacity to complete additional projects
How Much Does a Surety Bond Cost?
Surety bond costs vary widely based on several factors.
Typically, your cost (called a premium) is a percentage of the bond amount. For example:
Smaller bonds often cost a small percentage of the total value
Higher-risk applicants may pay higher percentages
Costs depend on:
Credit score
Business finances
Project size
Type of bond
As a general illustration, many small contractors may pay a modest annual premium for license bonds, while larger performance bonds can vary significantly depending on risk.
The best way to get accurate pricing is through a personalized quote.
Documents You’ll Likely Need
When applying for a bond, be prepared to provide:
Business financial statements
Personal financial statements
Work history or resume
Current project details
Bank references
Having these ready can speed up the approval process.
Tips to Improve Your Chances of Approval
Getting bonded can feel intimidating, but there are ways to strengthen your application.
Build Strong Credit
Pay bills on time and reduce debt where possible.
Even small improvements can help.
Start Small
If you’re new, begin with:
Smaller projects
Lower bond limits
Then work your way up.
Keep Clean Financial Records
Accurate bookkeeping is critical.
Make sure your records:
Are current
Clearly show income and expenses
Reflect stable operations
Work With an Experienced Agent
A knowledgeable agent can:
Match you with the right surety
Help present your application
Identify potential issues early
This can make a big difference, especially for first-time applicants.
Common Mistakes to Avoid
Many contractors delay or lose opportunities due to avoidable mistakes.
Watch out for:
Applying for the wrong type of bond
Waiting until the last minute before bidding
Submitting incomplete financial documents
Overestimating your project capacity
Ignoring credit issues
Taking a proactive approach can save you time and stress.
Surety Bonds vs Insurance: What’s the Difference?
This is one of the most common questions.
Surety Bonds
Protect the project owner
Require repayment if the surety pays a claim
Focus on performance guarantees
Insurance
Protects your business
Covers accidents and unexpected events
Does not require repayment for covered claims
Both are important—but they serve very different purposes.
When Should You Apply for a Bond?
Timing matters.
You should start the bonding process:
Before bidding on projects
When applying for a contractor license
As your business grows into larger contracts
Waiting until the last minute can delay project approvals or cost you opportunities.
How Long Does It Take to Get a Surety Bond?
The timeline depends on the bond type and complexity.
Simple license bonds may be issued quickly
Performance bonds for large projects take longer due to underwriting
Providing complete information upfront helps speed things up.
FAQ: Surety Bonds for Contractors
Do I need a surety bond to be a contractor?
Not always, but many states, cities, and clients require them. Public projects almost always require bonding.
Can I get a surety bond with bad credit?
It may be possible, but approval and cost will depend on your full financial picture. Some bonds are available for higher-risk applicants.
Is a surety bond the same as insurance?
No. A surety bond protects the client, while insurance protects your business from risks like accidents and damage.
How long does a bond last?
It depends on the bond type. Some last for the duration of a project, while license bonds often renew annually.
What happens if a claim is made against my bond?
The surety will investigate the claim. If it’s valid, they may pay the obligee—and you may be required to repay that amount.
Final Thoughts
Getting bonded is an important step in growing your contracting business. It shows clients you’re reliable, financially stable, and ready to take on serious projects.
While the process can feel complex at first, understanding the requirements—and getting the right guidance—makes it much more manageable.
Get Help With Surety Bonds
If you need help figuring out how to get a surety bond for your contracting business, Wexford Insurance can guide you through the process.
Call 317-942-0549 or visit https://www.wexfordins.com/ to request a free quote and speak with a licensed agent today.
