Delays with Bond Approvals: The Causes and Cures

We hear from contractors all the time that are unsure of whether their bonds will get approved or how long it will take. This uncertainty makes it tough to plan or run your business, but many contractors tolerate it because they don’t know what is “normal” or what they should expect. This article will shed some light on standard surety industry practices, our standards at CSBA, and how contractors can make sure they are aligned with surety professionals that will support their business, not hinder it.

Know What Bonding You Need

The first step in gaining certainty in your bond program is to understand your own bonding needs. Surety companies set programs by establishing the largest single bond they will issue for a project and the total backlog they will support for a contractor. This backlog number includes both bonded and unbonded projects as the surety wants to ensure a contractor has enough cash flow to complete all their work.

To figure out what bonding you need to support your business plan, start by asking yourself what the largest project you would feel comfortable taking on in the next year given your experience and resources. You will want to communicate this to your agent to ensure your surety can support projects of this size.

Determining the aggregate bonding capacity you need will largely be driven by the revenue you expect to perform over the next year and how quickly your projects turn on average. For example, if you expect to generate $20 million in revenue and your projects typically take one year to complete, you’ll likely need to have roughly a $20 million backlog and bond program. If your projects take longer, you may need a larger bonding capacity or if they turn every six months, you may need less.

Your surety agent should be able to walk through this with you to help come up with these figures.

What Bond Program is Your Surety Providing?

Next, you’ll want to understand the single and aggregate bonding capacity your current surety is providing. When we ask contractors this question many say they don’t know, which is a huge red flag. As a contractor, you need to know what your surety is supporting and if that lines up with what you need, so that you can operate your business with confidence. This is one of your surety agent’s primary roles, and if they’re not doing that, you really need to question whether they are providing the support and guidance you need.

What Steps Can You Take to Increase Your Bond Program?

Surety companies determine the amount of bonding they will provide based on the experience, organizational capacity, and financial strength of the contractor. If a surety can’t provide the bond program you think you need right now, your surety agent should be providing guidance on what steps you can take in order to get your bond program to where you want it to be. This is the surety agent’s second most important role.

Agents that don’t focus on surety often stumble at this stage, because they don’t perform their own underwriting and simply have to rely on whatever the surety underwriter tells them. Agents that are specialists, on the other hand, know when a surety company is being unreasonable, when to push back, and when to go seek out another surety option. A professional surety agent is also able to translate what a surety company requires into understandable and actionable items that they can help the contractor take. Ideally, you want a surety agent that not only outlines the steps, but can point you to specific resources for help with things like a bank line of credit or improving your financial reporting.

Timeframe for Bond Approvals

We hear often from contractors that it takes days and even weeks to get routine bonds approved. Getting set up with a surety can take a little time, but after you are approved and have an established bond program, routine bonds within the contractor’s normal operations and capacity should take a day or two at most. At CSBA, we guarantee a 24-hour turn around for routine bond requests for established customers. Larger jobs or projects that have unique characteristics can certainly take a little longer, but those are the exception rather than the rule.

Delays with bond approvals can further be avoided by agents anticipating and requesting routine updates that the surety will need to continue supporting the contractor’s bond requests. We find that many agents don’t do this simple proactive work and instead are in reaction mode creating unnecessary angst and stress for everyone involved.

Conclusion

Uncertainty around bond approvals doesn’t have to be the norm. By understanding your bonding needs, knowing what your surety is providing, and working with a knowledgeable agent who can guide you through the process, you can gain the clarity and confidence needed to run your business effectively. At CSBA, we believe contractors deserve timely answers, proactive support, and a bond program that grows with their goals. If your current bonding process leaves you guessing, it may be time to reevaluate whether you’re truly being set up for success.