How a Bank Line of Credit Can Affect Your Surety Bonding

Author, Andy Roberts, Account Executive, Surety, Rancho Mesa Insurance Services, Inc.

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When a surety carrier is evaluating a bonding program for a contractor, they use many different underwriting factors to determine an acceptable amount of bond capacity. They will consider a contractor’s working capital, net worth and work in progress schedules, to name a few. Another important factor that can help increase a contractor's bonding capacity is a bank line of credit. 

The construction industry is very unpredictable and unforeseen issues can arise that may interrupt jobs and cash flow. Surety carriers place such a high value on a bank line because it provides access to cash that may be critical to continuing the day to day operations and survival of the contractor's business. 

While bank lines are an important factor that underwriters use, the lines should not be depended upon for frequent use. Dependency on a line can be a sign that the contractor may have some deeper financial issues. Contractors should try to have at least 30 consecutive days during the course of the year, where they do not use their bank line at all.  

If your company is interested in working on jobs that require bonding, or you are a contractor with an established surety program but interested in ways to increase the programs limits, please contact me or Matt Gaynor at Rancho Mesa Insurance Services 619-937-0164 as we can assist with any questions you may have.