Qualification for Non-Construction Risks
Qualifying for non-construction bonds is typically easier than qualifying for construction performance and payment bonds. The main reason for this is that the non-construction risks are normally easier to administer a claim and the surety can merely hire another service contractor to complete the work. Since the contract funds will them flow to the surety the surety is only on the hook for the difference in price and any unpaid supplier prior to the claim. For supply contracts the measure of damages is typically the price difference in the supply unless the bond has an advanced payment obligation which would render the contract a bit more risky.
Bonds that are greater than $300,000 undergo greater underwriting scrutiny than those under $250,000. The obvious reason for this is the greater risk to the surety if there is a loss. The surety underwriter must feel comfortable that the principal has the requisite capital, character, and capacity to complete the job. There is a three page application that will need to be completed and a list of information that will need to be supplied as well.
These bonds can easilty be obtained up to $300,000 with simply good personal credit and a clean Dun and Bradstreet, For bonds greater than $300,000 the surety will require the following information:
- Good Credit with no open liens, judgements, or bankruptcies
- Copy of the contract or bid specs
- Current Business in Financials (accrual method)
- Last two fiscal year financials (accrual method)
- Personal Financial statements
- Bank Statements to verify personal and business cash
- Good business D&B rating
- Current AP and AR schedules
- A completed contractor questionnaire