Planning to Strengthen Bonding Capacity: A Practical 12-Month Guide

With U.S. public construction spending at about $521.7 billion (seasonally adjusted annual rate) and total construction activity above $2.16 trillion as of late 2025, contractors who expand bonding capacity may be better positioned to pursue larger public and private contracts over the next 12 months.

Why Bonding Capacity Matters Now

Public infrastructure programs and large private projects are contributing to demand for performance and payment bonds. Total public construction spending was about $521.7 billion (seasonally adjusted annual rate) in December 2025. Local, state, and federal capital programs funded through the Infrastructure Investment and Jobs Act are expected to support a pipeline of bonded work. Prime contractors may also require bonds from subcontractors on sizable commercial and industrial jobs, which can expand the market for qualified terms.

Industry reports such as The Surety & Fidelity Association of America EY Report also note continued surety market activity and selective capacity as carriers manage pricing and risk.

How Sureties Evaluate Bonding Capacity

Surety underwriting often centers on the three C’s: capital, capacity, and character. Underwriters typically review working capital and liquidity, backlog quality on a cost‑to‑complete basis, job‑cost controls, accounts receivable aging, and management continuity. Presenting clean, timely financial statements and a concise underwriting packet can help reduce uncertainty and help streamline underwriting review. Practical metrics underwriters may consider include current ratio, days sales outstanding (DSO), and a reconciled WIP schedule.

Surety bonding capacity is typically influenced by a range of financial, operational, and market factors, and outcomes will vary based on individual circumstances and underwriting considerations.  The following 12-month framework outlines practical steps that may help position your business for a stronger bonding capacity over time.

Sample 12‑Month Roadmap: Month‑by‑Month Actions to Help Increase Bonding Capacity

Months 1–2 — Baseline and plan

• Request a candid surety bonding underwriting analysis from your broker and obtain an underwriting checklist.
   
• With the underwriting analysis, identify the top three gaps (e.g., aged accounts receivable, underbilling, low cash).
   
• If you are not currently working with a construction-focused certified public accountant who can provide GAAP-compliant (Generally Accepted Accounting Principles-compliant) reviewed or audited financial statements, consider requesting references from your broker. The quality and consistency of financial reporting may play an important role in how sureties evaluate your bonding capacity.
   
• Establish a bank line of credit to provide a capital cushion. Many contractors target a line sized as a percentage of revenue, but the appropriate amount can vary based on backlog, cash conversion cycle, collateral, and lender requirements.

Months 3–4 — Clean financials

• Close books monthly, address aged receivables, and produce a rolling 13‑week cash forecast tied to WIP.
   
• With your broker, identify presentation adjustments that can be made to your internal financial statements.
   
• Prepare three years of financial statements with consistent accounting policies.

Months 5–6 — Strengthen controls

• Implement or refine job‑cost reporting, standardize change‑order capture, and reconcile WIP monthly.
   
• Document billing and collections policies.

Months 7–8 — Shape the pipeline

• Prioritize profitable, bondable work; secure letters of intent and clarify payment terms and retainage.
   
• Maintain an accurate “Percentage of Completion” backlog report (WIP) and be prepared to share it with underwriters as requested (often quarterly).

Months 9–10 — Underwriter engagement

• When meeting with your surety underwriter, consider bringing a concise packet: three years’ financials, current accounts receivable and accounts payable schedules, WIP, bonding history, and management resumes.
   
• Address financial policy development directly with the surety.

Months 11–12 — Negotiate and monitor

• Discuss potential increases to single job and aggregate limits based on improved metrics, and confirm any ongoing reporting expectations (e.g., quarterly) in writing.
   
• Discuss potential increases to single‑job and aggregate limits based on improved metrics and confirm any ongoing reporting expectations (e.g. quarterly) in writing.
   
• Maintain disciplined cash management and access to capital to sustain capacity.

Practical Quick Tips

• Review billing practices: tightening invoice cycles and aligning progress draws with measurable milestones may support more consistent billing.
   
• Address underbilling: through monthly WIP reconciliations and timely change‑order approvals.
   
• Demonstrate systems: a modern job‑cost platform and concise, well-structured dashboards may help facilitate the underwriting review process.
   
• Consider additional options: such as subordinated debt or letters of credit may be explored in consultation with your broker and counsel.

Outcomes

Firms that resolve aged receivables, standardize job‑cost reporting, and sustain margin consistency may strengthen working capital and the overall surety narrative over time. In many cases, sureties consider performance over multiple reporting periods before adjusting formal limits, and timelines can vary based on the contractor’s profile, project mix and market conditions.

In Conclusion

Contact your Acrisure surety specialist to request a bonding capacity review and a tailored 12‑month action plan. Prepare the underwriting packet outlined above and schedule a broker‑led meeting to set milestones and reporting cadence.

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