Performance and Payment Bonds for Contractors Bidding Jobs
In order to set up a bonding line with a surety company, you will need to follow the steps below. Once the bonding line is set up, you will have a good idea of the individual size and aggregate size of jobs that the surety company feels comfortable agreeing to in order to issue performance and payment bonds.
The initial process takes time and patience. Once established, the updating of financial statements is fairly easy. As your company grows your bonding line can increase also.
Required Forms
Contractors Qualification Questionnaire
Status of Contracts / Work in Progress
To start the process, please do the following:
Step 1: Questionnaire -- Please fill out the Contractors Qualification Questionnaire (see forms above) and fax it to us. We will need to have the original signed Questionnaire once your bond gets approved. The forms must be legible and complete. The process is similar to that of a loan application.
Step 2: Status of Contracts / Work in Progress - The Status of Contracts / Work in Progress form needs to be filled out and totaled (see forms above). This form gives the surety company information such as how well your company is doing with its present jobs, the size of the jobs, whether there are problems with a particular account, whether you are ready for additional work, the accuracy of your estimates for costs and profit; and how well the owners-obligee’s are paying your company. Click here for more information on Status of Contracts / Work in Progress.
Step 3: Business Financial Statement -- The surety will require a business financial statement prepared by your CPA. The financial statement is a reviewed statement to be prepared with the “cost-to-complete” method. This method is the one that is used throughout the construction industry. The mercantile statement does not take into consideration special circumstances that apply to the construction field, so make sure that your CPA will do the “cost-to-complete” method prior to paying for the financial statement. Many companies already have a financial statement prepared by their CPA. Click here for more information on Business Financial Statements.
On smaller bonds under $500,000.00, the internally-generated business statement may be acceptable depending on all factors connected with the risk. This should include a profit and loss statement along with a balance sheet. Please note that this will be an annual requirement.
Step 4: Personal Financial Statement -- Many people now have an in-house personal financial statement prepared and are able to produce it whenever it is needed. You may not have a program that keeps track of your personal financial information and elect to fill out the blank Personal Financial Statement form we provide (see forms above). Please print the form and fax or mail the completed form with the rest of your documents to us. Click here for more information on Personal Financial Statements.
If you have additional assets such as real estate, either wholly owned or partially owned, surety will require the following information in a spreadsheet format (see forms above).
- Name of owners or project
- Address of the property
- What type of property it is Like SFR
- Age of the structure
- Purchase price
- Outstanding loan amounts
- Income from the property
- Your percentage ownership
- Value of the property now
If you own other substantial assets, you may wish to supply that information to show financial strength.
Step 5: Contract or Bid Package -- A bid package is a portfolio of all the documents needed to take part in an invitation bid. Those who will be bidding on the project can look at the bid package and determine if they fit the criteria. Bidders will need to meet the skills and qualifications listed, be able to complete the project on time and stay within the specified budget. The contract or bid package outlines the scope of work and the bond requirements and also includes bond forms from the obligee which detail the length of the contract, penalties and special provisions, etc. The surety company needs this information because it is specific to the terms to which you are agreeing. In addition, the Bid Bond Request form needs to be completed for each job (see forms above). This information is redundant, but must be completed. Please note that many of the blanks will not apply to your specific job. Click here for information regarding Bond Pro Final Contract or Bid Worksheet.