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 or a bonding agent. Here’s a step-by-step guide to help you through the process:
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🔧 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 should be A rated or higher by A.M. Best and be included on the Federal Treasury Department List of approved surety companies.
Specialized surety bond agencies or brokers.
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.
Make sure the provider is licensed in your state and approved by the project owner (often the government or large general contractors).
3. Prepare Your Documents
You’ll likely need:
Financial statements (business and sometimes personal)
Work history/resume and company background
Current projects and backlog
References from project owners or general contractors
Bank reference letter
Proof of insurance
Contractor license
4. Complete the Bond Application
Each provider will have their own forms, but you’ll generally include:
Contractor details (name, license, tax ID)
Project details (owner, size, type, location)
Bid amount and estimated completion time
Requested bond amount (usually a % of contract)
5. Underwriting and Review
The surety company will assess:
Your capacity to do the work
Your financial strength
Your character (they call this the 3 Cs: Capacity, Capital, Character)
6. Receive Your Bond
For a bid bond, this is submitted with your bid package.
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. There are many factors involved so consult with a surety underwriter as the scope and duration of a project are key factors in determining what you will pay for bonds.
💡 Pro Tip:
Establishing a bonding line with a surety (like a credit line) can streamline future bond requests, especially if you’re bidding often. Don't fall for the quick application credit only surety bonding programs because you will most likely pay a higher rate and be very limited on the dollar amounts you can bid and the number of bonded jobs at once. Many insurance agents will steer you to the quick online bond application, no need to provide financial statements and these are not the best way for your bonding needs in the long run because of program limitations and higher typical rates.
Do you have a specific project or location in mind? Please provide us with the details and we can set up a call or meeting to discuss. The Service Insurance Company provides flexible surety bond solutions to meet your needs for first time bonding and for contractors that are currently bonded but capped off with bond size limitations. 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 can work with you for projects in the $1,000,000 to $5,000,000 range without the requirement of CPA certified financial statements, if you can provide other financial information including tax returns and internal financials and schedules and show there is plenty of track record, profitable operations and demonstrate enough cash on hand to fund existing operations and the project you seek bonding on. https://www.serviceinsurancecompany.com/new-surety-bond-application-form
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