Here are the 10 biggest lies in surety bonding:

1. “The surety is your partner and we are all in this together.”

OK and I have a bridge in Brooklyn to sell you. This is true until there’s a claim or loss and then the surety is entitled to sue the contractor for recovery. After all, they are a “for-profit” company that must answer to its stockholders. They are not in business to lose money.

In cases where collateral has been required by the surety, it will not be used to help the contractor finish the project. It is only used to help the surety perform the work with the replacement contractor in the event of default.

2. “We are requiring a 50% performance bond to save the contractors bonding capacity.”

Misplaced good intentions: Bond underwriters evaluate the contractors amount of remaining work, not the remaining bond amount.

3. “We stipulated a 50% bond to save money.”

Too bad it doesn’t work that way. Typically the bond cost is based on the contract amount. So you pay the normal price, but you get a bond for half as much. Cool!

4. “Slicing up the contract into phases will make it easier to bond.”

Most sureties will resist this, since it is still one contract. Their reinsurance treaties probably will not support such an approach.

5. “Dividing the contract into multiple contracts will make it easier to bond.”

This falls into the “smoke and mirrors” category. If it’s one big job for the client, then it’s still one big job. Experienced underwriters will recognize the true nature of the undertaking and support the client straight up if they deserve it (one contract and bond).

6. “The job specifications indicate that a performance and payment bond may be required at the owners discretion and a bondability letter must be accompany the proposal.”

Ughhh! May be a time waster. This smells like a GC who wants the subs “certified” by the surety, but doesn’t want to pay for it.

7. “A 100% Performance and Payment Bond is required equal to the contract amount.”

Originally, the project owner specified a performance bond. Upon receipt, they send the bond back, waive the bonding requirement and allow the work to proceed. Another misuse of the surety’s services. If there is a performance issue or unpaid bill, who gets the last laugh?

8. “The client will provide full corporate and personal indemnity.”

In order to get the bond, the client willingly signed an indemnity agreement outlining the handling of the premium and enumerating their obligations to protect the surety from loss. Now that they landed the project, they want to change the deal / ignore the agreement.

The nature of suretyship requires that underwriters rely on the good character of their clients. Sometimes such trust is misplaced.

9. “All company owners must give their indemnity.”

The real truth is that most, but not all do.

Typical exceptions: ESOP and publicly owned companies, low % owners, foreign / overseas owners, pre-nuptial agreements, non-transfer of asset agreements, high % collateral cases, well-heeled companies.

10. “You got turned down for a bond, because you don’t deserve one.”

Well, often this is just not true. In our experience, most contractors that are willing to place their own assets at risk to perform a lump sum contract, are worthy of a bond.

The problem may be the underwriter, not the applicant. Seek a bond agent and surety with the expertise and attitude needed to get the job done.

Steve Golia is an experienced provider of bid and performance bonds for contractors. For more than 30 years he has specialized in solving bond problems for contractors, and helping them when others failed.

The experts at Bonding Pros have the underwriting talent and market access you need. This is coupled with spectacular service and great accessibility.