Can I Get a Surety Bond With Bad Credit?

By Robin Raven

  • Overview

    With the heavy competition and economic stress of the construction industry, it's important that a contractor have the ability to get a surety bond if he hopes to be successful in the construction business. It's nearly impossible to get steady work without the bond. Workers and business owners with bad credit may fret that they may be unable to do what it takes to secure the bond, but there are steps that one can take to ensure obtaining such a surety bond every time.
    • Step 1

      Go to a professional agent or bond broker. He will be in charge of helping the contractor. This is especially important for a contractor with bad credit. The bond broker who specializes in surety bonds can help secure relations between the contractor and the surety bond-producing company. He may even influence a company to trust you, even though your credit report indicates past mistakes.
    • Step 2

      Speak with the underwriter at the security company. He may advise against working with you, and it's important that your prove your bond worthiness to the underwriter. If you have a significant amount of money saved--or proof of assets and steady track record of income flow--this can help your case significantly. Your credit is certainly not the only thing that the underwriter looks at, but it will help your case immensely if everything else besides your credit is stellar.

    • Step 3

      Gather all of your paperwork to submit to the company. You'll need to show how you run your business, how many employees work for you...and what they do and how they're paid. The employees' resumes should also be submitted. A business plan and continuity plan is immensely important. Letters of recommendation should be submitted from as many people as possible. Submit many more than necessary since you are not able to show a credit record that helps your case. Showing your credibility and worthiness in other ways is a must. Even if you have bad credit, try to show proof of the credit lines you have handled responsibly in the past.
    • Step 4

      Submit your fiscal business year-end statements from the previous year that you've been in business. Some bond companies may desire that you submit statements from up to 5 previous years.
    • Step 5

      Write out a statement of commitment. The surety bond broker will want to know that you have firmly committed--and can follow through--with the project stated. Demonstrate past examples of projects completed. Let them know exactly why you want to complete the project.
    • Step 6

      Pay the costs of the bond. This varies by company, and it is not a very large percentage of the project estimation.
    • Skill: Moderate
    • Warning:
    • Don't trust any surety bond producer. Check the background and gather references of your own. Having bad credit makes you especially vulnerable to those looking to scam others and make a quick buck.

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