A surety bond can feel like a locked door if your company is young, your financials are thin, or your credit has a few bruises. Many owners hear “come back after two years of operations” and assume getting bonded must wait. That’s not how it works. New ventures, first‑time contractors, and solo professionals get bonded every day, even without a long track record. The trick is understanding what a surety underwriter actually cares about and presenting a credible case that you manage risk like a pro.
I’ve helped startups secure their first license bonds, walked first‑year contractors through performance bonds, and seen plenty of applicants talk themselves out of good terms by approaching the process like a bank loan. Surety isn’t insurance or lending. It is a three‑party credit instrument, sized to risk, with underwriting that blends numbers, narrative, and controls. If you can meet the underwriter where they live, you can often get to “Yes” faster than you think.
What “bonded” really means, and why new businesses get tripped up
“Getting bonded” is shorthand for obtaining a surety bond. In a surety bond, the surety promises the obligee (a project owner, regulator, or client) that the principal (you) will perform a duty or pay an obligation. If you default, the surety pays the obligee, then seeks reimbursement from you. That last clause is the piece many first‑timers miss. Unlike insurance, a bond is not meant to absorb your loss. It guarantees your promise, then turns around and expects you to make it whole.
Underwriters look for two things above all: capacity and character. Capacity is your ability to perform or pay. Character is your track record of doing what you say, even when the wind shifts. Years in business help demonstrate both, but they are not the only path. A clean credit history, relevant experience, well‑structured contracts, disciplined cash controls, and the right collateral can substitute for time in the market.
The type of bond matters. License and permit bonds, notary bonds, motor vehicle dealer bonds, and freight broker bonds are often available on credit‑based programs. Performance and payment bonds for construction, service contracts, and technology implementations require deeper underwriting. Court bonds and fiduciary bonds sit somewhere in the middle, heavily tied to personal financial strength and the details of the case or estate.
The underwriter’s checklist, and how to meet it without a long history
When you strip away the forms, a surety underwriter is asking five questions. If you anticipate those questions and answer them with documents and decisions, you shorten the distance from application to approval.
- What is the exact obligation the obligee is requiring? Many applications fail because the bond form isn’t the one the obligee wants, or the language introduces unlimited risk. Bring the correct bond form, cited statute or specification, and any addenda. If the bond form has onerous terms, ask whether an alternate form is acceptable before you apply. How will the principal perform if the job gets harder? Underwriters want to see resources and contingency planning. Without years of statements, show capacity through resumes with relevant experience, supplier agreements, subcontractor quotes, and an honest schedule of how the work gets done. Where is the cash, and how is it controlled? For credit-based license bonds, your FICO and no recent bankruptcies might be enough. For contract bonds, show a 12‑month cash flow, a realistic work‑in‑progress schedule, and bank availability. If your business is new, include personal liquidity and a line of credit letter from your bank. What happens if the principal stumbles? The surety will look to indemnity. Be ready to sign a general indemnity agreement and, in some cases, pledge collateral. If you want to limit personal indemnity, propose alternatives like a cash escrow, trust funds, or joint checks on receivables. Who is steering the ship? If you are a first‑time owner but a twenty‑year superintendent, highlight that. If you lack direct experience, bring in a mentor or advisor with credentials and document their role, even if they sit on a limited consulting agreement.
You can build a convincing package in a week if you stay focused. I’ve seen brand new contractors qualify for a first performance bond up to 250,000 dollars with nothing more than clean personal credit, a 50,000 dollar bank line, a cost‑loaded schedule, and a signed subcontract with a seasoned electrical foreman. The key was transparency: realistic labor burden, supplier letters confirming terms, and a clear margin.
Types of bonds you can secure early, and how they differ
License and permit bonds are often the first ask. Think contractors’ license bonds, auto dealer bonds, mortgage broker bonds, and similar. These usually rely on personal credit scores, public records checks, and a short application. With a FICO above 680 and no recent tax liens, you can expect annual premiums in the 1 to 3 percent range of the bond amount. If your credit sits between 600 and 680, premiums climb to 3 to 10 percent, and you may need extra documentation. Below 600, markets still exist, but pricing gets steep, and some states have bond form quirks that shrink the pool of willing sureties.
Freight broker bonds follow their own rules. The required BMC‑84 bond is 75,000 dollars nationwide. New brokers with limited credit can still get approved, but prepare for higher rates the first year and a cash collateral request or trust alternative. I’ve watched new brokers drop their annual premium by half in year two just by avoiding claims and maintaining strong payables practices.
Court bonds are a mixed bag. Appeal bonds, probate bonds, and fiduciary bonds lean heavily on personal financial strength. If you can present a personal balance sheet with liquidity above the bond amount, good credit, and clean legal history, many sureties will entertain the risk even if your business is new. If not, consider cash collateral or a letter of credit to bridge the gap.
Performance and payment bonds deserve the most planning. For first‑time contractors, sureties often start with a single job limit of 200,000 to 500,000 dollars and an aggregate at two to three times that, assuming you can show:
- A completed contractor questionnaire with personal and business financials A CPA‑prepared balance sheet if available, or at least tax returns and internally prepared statements Evidence of margin in the job, defined scope, and favorable payment terms A track record of similar work, even if performed as an employee elsewhere
That last item trips up many. Underwriters don’t need five years under your company’s name. They do need evidence that you have executed similar scopes, in similar sizes, with your hands on the throttle. Resumes, project sheets, letters from former employers or clients, and photos go a long way.
Credit challenges: finding a path when your score isn’t perfect
A thin or bruised credit file is common for new owners. Maybe you bootstrapped and used personal credit cards. Maybe you had a medical collection or a tax issue. Underwriters are human. They review not only the score, but the story and the current state. If you have dings, tackle them in sequence.
Start by pulling your own report and identifying active negatives. Unpaid collections and tax liens are red flags. If you can compromise and settle, do it, then keep the settlement letters. For tax issues, show an installment agreement and three months of on‑time payment history. If you went through bankruptcy, bring discharge papers and evidence of re‑established credit lines, even small ones. Underwriters weigh recency and control. A five‑year‑old Chapter 7 with two years of spotless performance since can be easier than a new 30‑day late.
If credit remains a barrier, you still have options. Some sureties operate high‑risk programs for license bonds and small contract bonds. Pricing is higher, but you can use them as a bridge. Another route is collateral, usually cash held in an interest‑bearing account under a security agreement. I have placed applicants with 580 FICO by posting 50 to 100 percent collateral for a first term, then negotiating a step‑down plan as they built payment history.
Building a surety‑friendly business, even on day one
Underwriters respond to signals. You can send stronger ones without waiting years by tightening a few fundamentals.
Open a dedicated business bank account and keep it clean. Avoid running personal expenses through it. Deposit all project funds there. If you ever need to show a bank statement to support cash, you want it to tell a simple story.
Adopt job cost codes and use them. Even a simple spreadsheet that tracks labor, materials, subs, equipment, and overhead by job is better than a shoebox of receipts. If you can show your cost to complete by line item, you will earn trust.
Secure supplier terms in writing. A 2 percent discount for paying within ten days looks nice, but 30‑day terms with no surprises matter more to your cash flow. If a supplier will confirm limits and terms on letterhead, attach that to your submission.
Right‑size your overhead. The top cause of trouble for new contractors seeking bonds is a mismatch between fixed overhead and predictable revenue. Keep your core team lean, rent equipment where you can, and avoid long leases until you have backlog coverage.
Workmanlike contract management makes the difference between marginal and bankable. Use written change orders. Limit open‑ended indemnities. Add a paid‑if‑paid or at least a paid‑when‑paid clause where legal. These are not academic concerns. I’ve seen underwriters back away from otherwise fine jobs because the contract allowed unlimited liquidated damages with no cap and no objectivity.
Personal indemnity, collateral, and the art of negotiating terms
New businesses rarely get corporate‑only indemnity. Expect to sign personally. You can, however, shape the risk. If your spouse is not active in the business, ask whether spousal indemnity can be excluded or limited to community property where relevant. Offer mitigations: a project escrow, funds control, or joint payee agreements to suppliers. Funds control means a third party manages project receipts and pays vendors directly. Sureties often relax underwriting when funds control is in place, because it reduces diversion risk.
Collateral is a tool, not a failure. Cash collateral posted for a first term can unlock bondability and lower pricing. Structure it with clear release triggers: for example, upon timely completion and no claims for 90 days. If you offer a letter of credit instead of cash, confirm the issuing bank and format are acceptable to the surety. Some sureties also accept assignment of a CD.
If your balance sheet is thin, consider adding a strong co‑indemnitor. It could be a financially stable partner, a parent company, or an investor who believes in your plan. Draw clear boundaries in your operating agreement to match the indemnity.
Choosing the right surety partner and agent
Not all sureties chase the same business. Large markets lean mid‑size and up. Regional sureties often have appetite for smaller, first‑time accounts and can be more nimble. The agent matters as much as the market. A specialist surety agent knows which underwriters are open to startups and which prefer mature accounts. They will also help you shape your story before it lands on the underwriter’s desk.
Here is a concise sequence that works when you’re new and trying to get bonded for the first time:
- Clarify the exact bond requirement and obtain the correct form from the obligee. Assemble a package: application, resumes, personal and business financials, bank letter, project details, supplier letters, and a draft contract. Decide your stance on indemnity and collateral before you’re asked, then propose it. Ask your agent which surety program fits your size, credit profile, and industry, then let them target two or three markets at most. Respond quickly to follow‑up questions and keep every claim or dispute off your record while the bond is active.
A good agent will also help you avoid expensive pitfalls like paying for the wrong form, agreeing to an unbondable contract clause, or submitting half‑baked financials that trustworthy Axcess Surety set the wrong tone.
Real‑world examples: how owners bridged the “no history” gap
A solar subcontractor spun out from a national EPC. The owner had 12 years of field leadership and commissioning experience, but the new company had only four months of operations and 85,000 dollars in the bank. The project owner required a 350,000 dollar performance and payment bond. We built the case with a resume highlighting directly comparable projects, a subcontract with clear milestones, and supplier letters confirming price locks for 60 days. The surety wanted comfort on cash flow. We added a funds control agreement at a cost of 0.75 percent of progress billings. Approval came with personal indemnity and no collateral. The job finished early. On the next bond, funds control was waived.
A new auto dealer needed a 50,000 dollar bond in a state with a strict form. Personal credit was 625 due to a past medical collection. We applied through a program that accepts credit scores down to 600 if there are no open bankruptcies or unpaid tax liens. Premium was 8 percent the first year. The owner set reminders and paid every account on time. Twelve months later, the credit score was 685 and the renewal premium fell to 2.5 percent.
A freight broker entered the market during a tight capacity year. With only 20,000 dollars in working capital and a limited credit file, most sureties quoted the BMC‑84 bond at a painful rate. Instead, the broker elected to place the alternative BMC‑85 trust, funding it with a 75,000 dollar line of credit backed by a relative’s investment account. That freed up operating cash and gave them a year to build trade references and bank history. When they switched back to a bond, the rate was cut in half.
These stories share a pattern. Each owner faced the same objection: not enough time in business. Each countered with substance and structure. Underwriters say yes to that.
Pricing expectations when you’re new
Premiums reflect both the obligation and your profile. For license and permit bonds, first‑year rates cluster by credit:
- FICO 700 and up: 1 to 3 percent of the bond amount per year FICO 650 to 699: 3 to 6 percent FICO 600 to 649: 6 to 10 percent Below 600: 10 percent and up, or collateral
For contract bonds, pricing often falls between 1 and 3 percent of the contract amount for the first year of maintenance included, though small bonds can have minimum premiums. Your rate improves with a clean record and larger volume over time. Expect that underwriters may set a single job limit and an aggregate limit at first. As you complete work without claims, those limits expand.
Programs for “quick bonds” exist for jobs up to 500,000 dollars with streamlined underwriting, usually tied to personal credit and a short form. They are valuable for emerging contractors with solid resumes. The trade‑off is tighter limits and higher rates than a fully underwritten account. Use them to win early work, then graduate to a standard program as you accumulate financial statements and references.
Documentation that moves the needle
When your business history is short, documents substitute for time. A well‑organized, honest package can compensate for thin financials more than most owners expect. The combination below tends to get traction:
- A personal financial statement that lists cash, investments, retirement accounts, real estate with fair market values, and liabilities with accurate terms. Underwriters can usually spot inflated valuations. Honesty sells. A business balance sheet and income statement, even if internally prepared, current within 90 days. Label owner draws and loans clearly. Show aging for receivables and payables. Bank letter confirming average collected balance over the past three months and any lines of credit with available capacity. Resumes that highlight relevant, measurable accomplishments. “Managed site crews” is weak. “Led installation of 1.2 MW rooftop array, 9 trades, zero lost‑time incidents, 3 percent under budget” is strong. Contract documents with payment terms, liquidated damages caps, scope definition, and dispute resolution. If you can show that the obligee pays in 30 days from approved invoice and retainage is capped at 5 percent, you reduce perceived risk.
Underwriters also listen to references. A short email from a supplier about your on‑time payments, or from a former employer about your project leadership, helps more than a glossy brochure.
Avoiding the traps that derail first‑timers
New principals lose approvals for reasons that have little to do with skill. The traps are predictable.
Overpromising on schedule or margin leads to distrust. If you claim a 25 percent gross margin on a job that usually pays 12 percent, the underwriter will assume other assumptions are off too. Present realistic, defensible numbers.
Signing a contract with unlimited liquidated damages or broad form indemnity can make the job unbondable. Ask for caps tied to direct costs or a daily LD with a reasonable maximum. If the owner refuses, show the underwriter why the provision is unlikely to bite, or pass on the job.
Ignoring change orders burns cash. Sureties spot the problem when costs spike and billing lags. Use written changes and document schedule impacts.
Letting tax obligations slide is a quiet killer. Underwriters rank tax liens next to claims in terms of concern. If cash is tight, talk to your CPA early and set up an installment plan before a lien hits public record.
Trying to hide problems breaks the relationship. If a job stumbles, call your agent and surety. They want performance, not default. Often they will help manage funds, negotiate with the obligee, or bring in technical support if you flag the issue early.
How getting bonded strengthens your business beyond compliance
Owners often pursue bonds because they have to. Once in place, good bonding practice makes the company stronger. To qualify and renew, you build timely financial reporting, negotiate better contracts, and keep clean payment practices. That discipline lowers your failure rate even on unbonded work.
Bonding also opens doors. Public work nearly always requires performance and payment bonds. General contractors often push that requirement downstream. If you can check the box, you move up the bid list. I have watched small firms triple their revenue within two years simply by becoming bondable and selective with the work they pursued.
Remember that the goal is not a one‑time approval. It is a working relationship with a surety that grows as you do. The first year might feel constrained. The third year can feel remarkably flexible if you keep your promises, close your jobs cleanly, and communicate.
A practical path for getting bonded when you’re new
Treat the process like a project. Set a two‑week sprint.
Week one, gather facts. Pull the correct bond form. Draft a realistic budget and schedule for the obligation. Update resumes and assemble financials. Call your bank for a relationship letter and check whether a small unsecured line of credit is available.
Week two, shape your package with your agent. Decide if you will accept personal indemnity, and what collateral, if any, you can post without straining operations. Identify two suppliers willing to confirm terms. Review your contract for risky clauses and seek edits before submission. Submit to targeted sureties, not a blast. Then answer questions fast and fully.
Most first‑time license bonds can be placed in 24 to 72 hours. First contract bonds, if the package is solid, often turn in five to ten business days. If the underwriter pushes back, ask for specifics. Sometimes the hurdle is a single clause, a missing schedule, or a concern that funds might be diverted. Solve the exact problem, resubmit, and keep the tone professional.
Getting bonded without years of business history is not about pretending to be bigger than you are. It is about showing that you manage risk with clarity and discipline. Underwriters respond to that. So do project owners and regulators. If you move deliberately, document well, and hold your standards, you can be the company that gets the nod, not the one told to come back later.