Each surety company has its own underwriting standards and requirements, but there are shared fundamentals common to the underwriting of most surety companies. Before a surety underwrites a bond, the contractor typically undergoes a careful, rigorous, and thorough process, often referred to as prequalification.

The prequalification process takes time as the producer collects information, answers questions the surety underwriter may have, and assists in verifying information. The surety must be satisfied that a contractor has the ability to meet current and future obligations, has a good reputation, has experience meeting the requirements of the projects to be undertaken, and has (or can readily obtain) the equipment necessary to perform the work. The surety also looks for contractors who run a well-managed, profitable enterprise, keep promises, deal fairly, and perform obligations in a timely manner.

Prequalification Checklist

Here is what a contractor may need to provide:

Completed Surety Questionnaire
Corporate year-end financial statements (past three-to-five years)
Six-month interim statement if available
Current corporate tax returns
Current Work-on-hand schedule
Personal financial statements from all owners
Current personal tax returns
Resume on all owners/key employees
Bank reference letter

Next: Financial Statements