How to apply for a contractor bid and performance bond

Applying for a contractor bid and performance bond involves a few steps, and it typically goes through a surety company submitted by your insurance agent. Here’s a step-by-step guide to help you through the process:

🔧 Step-by-Step: How to Apply for a Bid and Performance Bond

1. Understand the Bond Types

• Bid Bond: Ensures that if you’re awarded a contract, you’ll honor your bid and enter into the contract.

• Performance Bond: Guarantees that you will complete the project according to the contract's terms and specs.

2. Find a Surety Bond Provider

• Look for:

  • Insurance companies that offer surety bonds.

  • Specialized surety bond agencies or brokers.

    
    

3. Prepare Your Documents for the application process (consider avoiding credit score only online bonding programs that don't require financials)

You’ll likely need:

• Complete the Bond Application

  • Contractor details (name, license, tax ID)

  • Project details (owner, size, type, location)

  • Bid amount and estimated completion time, delay damages & other damages

  • Requested bond amount (usually a % of contract) check specs & check for special forms required and other required items such as special insurance coverage which may be difficult and costly to obtain

4. Financial statements (business and personal)

• Current projects and backlog

• Bank reference letter, recent bank and credit line statements

5. Underwriting and Review

The surety company will assess:

• Your capacity to do the work

• Your financial strength

• Your business and personal credit standing

6. Your Bond

• For a bid bond, this is submitted with your bid package. Check bid package for special terms and conditions that may negatively impact you and evaluate the risk of moving forward which can include high liquidated and consequential damages.

• If awarded the project, you’ll then provide a performance bond (and often a payment bond) before work starts.

7. Pay the Bond Premium

• Bid bonds are usually low-cost or free if you have a relationship with the surety.

• Performance bonds typically cost 1% to 5% of the total contract value and depends on duration and complexity of the project and your financial and credit standing and track record. Important to know these details when bidding.

Find a Surety A rated or higher by A.M. Best and included on the Federal Treasury Department List of approved surety companies. The Service Insurance Company is a provider of bid and performance bonds and is A.M. Best rated (A) and is approved by the Federal Treasury Department.

Most surety bond companies require CPA certified financial statements when bond sizes go beyond the $500,000 to $1,000,000 threshold. The Service Insurance Company bonds projects in the in excess of $1,000,000 and does not always require CPA certified financial statements. Set up a meeting with a Service Insurance underwriter and find out how they can help you grow your business. Service has been helping contractors grow their businesses' using bonding as a tool for over 30 years.