Small, disadvantaged, and emerging contractors seeking to obtain surety credit and grow their business will have many questions about the process. NASBP offers its membership resources to help contractors on the path to achieving surety credit, many of them included in the NASBP Producer Communications Toolkit 2.0.

NASBP document “Answers to 51 Questions Small Contractors Ask About Bonding” is a great place to start. This document offers straightforward answers to some of the most frequently asked questions about bonding. Below is a sampling of questions found in the document, but make sure to review the entire publication.

Question #1: What is a surety bond?
A surety bond is a promise to be liable for the debt, default, or failure of another. A surety bond is a three-party contract by which one party (the surety) guarantees the performance of a second party (the principal) to a third party (the obligee). Surety bonds that are written for construction projects are called contract surety bonds. (Otherwise, they are called commercial surety bonds.)

The surety is a company licensed by a state department of insurance to provide surety bonds to third parties to guarantee the performance of a principal.

The principal is the person or entity (in construction, the contractor or subcontractor) on whose behalf the bond is given. It is the principal’s obligation that the surety guarantees.

The obligee is the individual or entity with whom the principal has a contract and to whom the bond is given. In construction this is the project owner or the prime contractor.

If the owner is the bond obligee, then the prime contractor is the principal. If the prime contractor is the obligee, then the subcontractor is the principal.

Question #6: What documents will the bond producer ask me to bring to our first meeting?

Question #15: Can I just get a blanket bond to cover all my surety bond needs?
Because contract bonds—bid, performance, and payment bonds—follow a specific contract/ obligation, each bond is issued for that particular purpose on a case-by-case basis. A contractor’s bond producer and surety underwriter review the contract documents, especially the scope of work, and make sure that the work under the contract fits within the contractor’s normal abilities and capabilities.

Question #33: What is the difference between a balance sheet and an income statement?
While the balance sheet and the income statement are both important financial statements for a business, they differ in terms of time frame and content.

A balance sheet is a summary of a company’s financial balances as of a specific moment of time (such as of 12/31/__). Its content shows assets, liabilities, and shareholder equity (net worth); and the values expressed are only accurate as of that stated specific date. In simpler terms, the balance sheet gives a snapshot of what a business has and what it owes as of right now.

The income statement, also known as a profit and loss statement, includes content that shows revenues and expenses over a period of time (such as Q1 20__ or annual statements over the entire year). The income statement includes revenues less expenses to show net income. Income statements are helpful in evaluating how much a company has earned or lost over a period of time.

Other New NASBP Resources for Small, Emerging Contractors

New Contractor Bonding & Mentoring Program
NASBP offers many other resources for small contractors in pursuit of surety credit, including the new Contractor Bonding Education & Mentoring Program, which provides free, online instruction on how to qualify for construction surety bonds. The program is comprised of two components: a set of eLearning modules available online 24/7, and an optional mentor program with surety industry professionals who provide practical advice and recommendations to the contractor. NASBP Bond Producers who would like to serve as mentors for the program should contact NASBP at prodev@nasbp.org.

Revamped NASBP SuretyLearn for Contractors Website
Another great resource is the NASBP SuretyLearn for Contractors, a newly revamped website to which NASBP members can direct their clients. This is a one-stop shop loaded with free surety information for small contractors. The site offers links to many resources, including the document described above, “Answers to 51 Questions Small Contractors Ask About Bonding.” Additional resources include NASBP Virtual Seminars, NASBP Let’s Get Surety Podcast episodes, the NASBP Be Guaranteed to Succeed Campaign contractor resources, a link to The Contractor Bonding Education and Mentoring Program, as well as links to government agencies that contractors may need to contact. Many NASBP producers refer new clients to the Surety Learn for Contractors website, because it provides information in detail about topics the producer and new client discussed and enables the new client to read and learn more about these topics on his or her own time and preferred pace.