Growth and Expansion: What to Expect From Your Surety

With growth and expansion comes risk—and not properly identifying, managing and mitigating these risks can lead to trouble. Make sure you and your surety partner are on the same page regarding this key information.
November 5, 2021

The decision of whether to grow and expand is one that contractors face daily. Some of the many reasons why a contractor may decide to grow or expand include requests from key customers, access to additional capital, the addition of key personnel, market conditions, strategy or necessity. Growth and expansion can take many forms: larger contract price, more complicated or expansive scope, changes to the business plan, mergers and acquisitions, hiring of a new division or working in an unfamiliar geographic area.

With growth and expansion comes risk. Not properly identifying, managing and mitigating these risks can lead to troubles ranging from slight to severe, including financial losses, project defaults or even contractor failure.

A good surety partner will seek to understand. While big jumps in job size or other plans to expand can be red flags, a surety will always try its best to underwrite the contractor’s ability to understand and manage the inherent risks of growth and expansion.

In these scenarios, your surety will likely have additional questions and information needs centered on project specifics and the three Cs of surety: character, capacity and capital.

Project Specifics

When you are looking to make a jump in job size, project scope or even location, your surety may ask the following:

  • Explain the opportunity and why you are interested.
  • What is your relationship with the owner and architect?
  • Type and location of the project—what is your experience with both?
  • Is there anything in the scope that is new or unfamiliar to you?
  • Do you have sufficient resources or will you need to add anything additional such as equipment, technology or personnel? How about field labor?
  • What are the key subcontractors if any?
  • Do you anticipate any issues procuring material and equipment, including any specialty items? How will the lead times of these items affect the schedule?
  • Are the specifications/contract terms favorable?
    • The surety will typically want to review contract and subcontract terms, as well as any required bond forms.
  • The surety may also ask to review a formal breakdown of job costs and profit.

Positive underwriting considerations can include:

  • Familiar owner;
  • Familiar architect;
  • Industry-standard contracts or favorable contract terms;
  • Bonding of subcontractors;
  • Sole negotiated project; and
  • Evidence of sufficient resources to handle.


Your surety will have already assessed character through meetings, references, credit reports and reputation in the industry. In order to evaluate the growth and expansion plans, the surety may also ask for the following:

  • Resumes for any new personnel or key people.
  • Additional references.
  • Qualifications and information regarding the acquired firm, if applicable.
  • What are the reasons or motivations to grow or expand?
  • What is the short- or long-term strategy?

Positive underwriting considerations can include:

  • Long-time relationship with surety or with surety agent/broker;
  • An excellent reputation; and
  • A positive meeting with the surety


Capacity is the assessment of the contractor’s ability to do the work. To evaluate the growth and expansion plans, the surety may also ask the following:

  • Pro-forma organizational charts—what will these changes look like, if any?
  • Will additional hires be necessary? If so, which positions?
  • Will additional equipment be needed?
  • Who bid or will be bidding the work?
  • Who will be supervising the work?
  • Do you currently have the systems capable of handling the growth and expansion?
  • How do the projects compare to previous work completed?
  • What other risk mitigation techniques, best practices or processes have you implemented?
  • Run-off schedule of field labor.

Positive underwriting considerations can include:

  • An updated comprehensive business plan or formal written plan on how the company plans to succeed.
  • Excellent communication.
  • Workflow charts.
  • Positive organizational practices especially within bidding, job costing and accounting.
  • Positive meeting with the surety.


Due to the potential of higher risks and costs from mistakes made while in growth or expansion mode, your surety will likely treat this “C” as the most important. In addition to its standard underwriting, sureties may also ask for the following additional information:

  • Current statements of cash and bank line of credit balances.
  • 12-month projections of revenue and profit.
  • Pro-forma balance sheet.
  • Pro-forma cash flow statements.
  • Run-off schedules of work-on-hand; pro-forma run-off schedules for potential future work.

Positive underwriting considerations can include:

  • A long history of profitability;
  • More than sufficient working capital;
  • Low debt-to-worth ratios;
  • Long-time relationship with bank and more than sufficient bank line availability; and
  • Personal indemnity and, if necessary, additional capital.

Growth and expansion are essential aspects of a contractor’s long-term success. The surety has a vested interest in the contractor’s success and will always seek to gain comfort through its underwriting process. This process should lead to intelligent discussion and provide added value to a contractor in its own evaluations when executing on its growth and expansion plans.

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