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5 Ways to Boost Your Surety Bond Capacity

Ready to unlock your business’s true potential? Here are a few tips to increase your surety bond capacity.

Your surety bond capacity determines the amount and size of the surety bonds your company can acquire, impacting its ability to secure multiple or large-scale contracts. If you want to enhance your business’s potential, here are several tips to increase your capacity.

  1. Maximize your cash and capital. Many surety bond producers expect your business to have capital equal to at least 10% of your secured projects or work backlog. Consider retaining earnings in the company instead of withdrawing or spending them — and make this a long-term habit.
    You could also put more equity in your business through personal cash or even a shareholder loan (though this may require special provisions from your surety producer). Liquid personal or business assets or a business line of credit may also improve your financial standing by increasing your access to cash.
  2. Improve your accounting processes. It’s possible that many claims could have been avoided with more accurate, well-managed accounting processes. Use an updated, efficient accounting system — or, even better, hire a third-party accountant or CPA. They can objectively verify your financial standing, lend credibility to your financial reports, and help strengthen your financial health.
    CPA statements are also often required by producers, especially for large contracts, and they typically look better to shareholders, which may in turn yield more capital.
  3. Build a relationship with your surety bond producer. Producers are more likely to consider extending your bonding capacity if you have a stable relationship with them. Consistently work with one producer over time and be communicative and transparent with them about your financial health and goals.
    After a few successfully completed projects, they’ll have a better idea of your reliability and skill as a contractor and might be willing to extend your capacity. You might also gain a better sense of what they look for when considering capacity increases.
  4. Demonstrate strong project and business management skills. Your ability to stay organized and efficiently manage multiple projects — while staying in your wheelhouse and not taking on more than you can handle — speaks to your competency and reliability as a business.
    Document details of all projects you work on, especially if you have a backlog or multiple simultaneous projects. This can help demonstrate your earning capacity and fiscal responsibility, as well as your dedication to ensuring all jobs are completed as promised.
  5. Mitigate your risks. Subcontractor and supplier issues can negatively impact a project’s timeline, quality, or budget, increasing the risk for your surety bond producer. To mitigate these risks — and increase your chance of earning expanded capacity — adopt a thorough vetting process for all subcontractors and suppliers. Subcontractor bonds, contractor liability insurance, and subcontractor default insurance can also help protect you and the producer.
    Similarly, future-focused contingencies like a detailed business plan, tax strategy, and succession and job continuity documents can make producers feel more secure in partnering with you.

Grow With Gray Surety

At Gray Surety, we understand that you need a producer who’s responsive, experienced, and reliable. We provide a forward-thinking, streamlined experience and will meet most contract and commercial surety bonding needs. View our surety bond services or reach out today.