A performance bond guarantees to the owner that the contractor will complete the project according to the contract terms and conditions. The school district is requiring one for its roofing project. A surety company issues the bond and they will look at your company's capacity, capital, and character before writing one.
Capacity The surety wants to know you have the experience and equipment to do the job. They will ask about your past projects, especially those similar in scope and size to the roofing bid. They will also look at your current workload to ensure you are not overextended.
Capital The surety will assess your financial health. This includes reviewing your balance sheet, income statements, and cash flow projections. They want to see that you have enough working capital to fund the project, cover unexpected costs, and manage your business operations. They will likely ask for financial statements for your business and personal financial statements for the owners.
Character This refers to your company's reputation and the integrity of its owners. Sureties often perform background checks and look at your credit history. They want to work with contractors who have a track record of fulfilling their obligations and maintaining good relationships with clients and subcontractors.
Underwriting process The surety will also consider the specific terms of the contract, the project schedule, and any unique risks associated with the roofing work. They might ask for details about your project management plan, your subcontractors, and your safety program. This specific bid is for a school district, which is a local government entity, and it is a roofing project. We saw an Invitation for Bid (IFB) that requires these bonds for the full contract value. We have not had a surety before and are working on gathering all our financial and project documents.
What other information might a surety ask for, especially for a first-time bond? What was your experience with getting your first performance bond?