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I'm fairly unfamiliar with these, as we normally stick to residential work.

A builder we work with multiple times through the year is managing a large scale build, and it requires a 5% bid bond and if bid is accepted, a 100% performance bond.

We do about 500k a year in sales, and I had my agent price out the bid bond, to my shock, we were denied the 5% bond (valued at 2.5k). This is not a huge issue as I can just submit the proposal with a cashiers check to cover 5% of the proposal.

My concern is the 50-60k performance bond. My credit score is in the medium range 670-700, and we do 100k in sales a month in the summer months for the past 5+ years with no issues.

Anyone have any advice or have ran into issues with obtaining Performance Bonds? I was going to shop around for them today but thought someone here might be able to point me in a good direction!
 

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You can get pre-qualified for the performance bond. If you have no bonding history it can be tough to get the first one, but after that you are gtg.
 

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Bonding is tighter now than it has been. Companies are going to want to see good financials and good credit history. We started 3 years ago and showed good profits all years but didn't really have established credit and it took a while to get some bonding. They will probably ask if you have a line of credit also, they want to see if you have access to cash if you need to finish a job. They may also want prepared financial statements from an accountant at the very least. Not sure if you used a accountant or not, if not it will cost some money to have one done.

Check with your local sba they sometimes will guarantee bonding for small companies. Not sure what the process will be, most likely a bit of a pia.
 

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Assets.. Assets.. Assets..

I know a guy that passed on a large project because he wasn't willing to personally secure the bond.

I know another guy that saw dollar signs and used his home's equity to secure the bond.

The guy that got the job couldn't perform since it was an entire different world compared to residential. Safety, Billing, AIA documents, Etc. He got thrown off the job and bond cashed.

The first guy that passed because he wasn't willing to risk his personal assets came in and cleaned up the mess and probably made more than he would have originally if he was awarded the job and successfully completed it.

That being said. I've secured a few bonds on projects. For me it was about 4.5% of the bond limit.
 

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Bonds are an entirely different animal. Underwriters are a pain in the ass. They like lots of cash and history. Good luck. And don't get in over your head.
 

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As previously mentioned, bonds are all about how much cash you have in hand and how much you typically bring in. How big is the contract that the GC is asking for a P&P bond?
 

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Lots of bonding companies have tightend up on their requirements a lot. Like others have said it's about cash and liquid assets. Gross sales aren't good enough anymore. A rule of thumb; if you need a $100K P&P bond, you basically need to have $100K in cash/assets.
 
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