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A RocketLevel guide for restoration owners and finance leads moving into commercial and public work, backed by decades of experience in the trade. About a 9-minute read.
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Reviewed October 2026. SBA program limits and fees change, and indemnity rules vary by state. Use this page to know what to ask, then confirm with SBA, a surety-focused producer or a construction attorney before you rely on it.
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You found the job. It is the biggest reconstruction you have been offered, the general contractor wants you, and then the bond request comes back declined. Or worse, your agent tells you the surety will not even open a file because your financials are not in a form they can underwrite.
Many owners hear that as a judgment on the company, but surety is a credit product, and a decline is a credit decision made on a specific set of documents by an underwriter who has never met you and never will. The documents are fixable. And when they are not fixable fast enough, there is a federal guarantee program that exists precisely to get small contractors bonded who cannot get bonded on their own. It is authorized at 15 U.S.C. 694b and written into 13 CFR Part 115, and it is almost invisible in this trade.
Surety underwriting is usually described as the three C's: character, capital, and capacity. That frame is too vague to act on by itself, so this is what the words mean on the underwriter's desk.
Character is the personal credit of the owners, the litigation and lien history of the company, how long you have been in business under this name, and whether your references say you finish. This is also where the personal indemnity requirement lives. Surety is not insurance and it is not meant to absorb your losses. The surety expects to be made whole, which is why contract bond programs require a General Indemnity Agreement signed personally by the owners. Whether a spouse must also sign, and what a signature reaches in a community property or joint-asset state, is set by state law and by the individual surety's form, so ask the producer for the actual form and read who it binds before anyone signs. If you are not willing to sign personally, you are not going to be bonded, and finding that out at the kitchen table the night before the bid is a bad way to learn it.
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A General Indemnity Agreement puts your personal assets behind the bond. It is a personal guarantee, and signing it puts your personal assets, and potentially your spouse's, behind every bonded contract rather than just this one. What the form reaches, and whether a spouse's signature is required or merely requested, is set by state law and by the surety's own form. Neither is settled on this page. This is not legal advice. Have a construction attorney in your state read the indemnity form before anyone signs it. That bill is small next to the one for unwinding it.
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Capital is working capital and net worth. Working capital, current assets minus current liabilities, is the number sureties lean on hardest, and they do not accept your balance sheet at face value. They discount it. Receivables past 90 days, related-party receivables, inventory, prepaid expenses, amounts owed by an affiliate, and underbillings are the lines that most often get reduced or removed. The working capital an underwriter credits you with is regularly a good deal lower than the one your accounting software prints, and underwriters commonly look for working capital somewhere in the range of five to ten percent of the bonded backlog they are being asked to support. Ask your agent what number the surety actually used, which lines it adjusted and by how much, because that conversation tells you exactly what to fix. The list of discounted lines and the five to ten percent band are RocketLevel working figures from files we have watched go through underwriting.
Capacity is the work-in-progress (WIP) schedule, and it is the document that does the most work in the file. The underwriter is reading it for four things: how much backlog you are already carrying, whether your billings track your progress, whether the same job appears at the same margin quarter after quarter, and whether jobs finish where they started.
That last one is the fade analysis, and it quietly kills a lot of bond lines. Fade is the gap between the gross margin you estimated on a job and the margin you actually delivered. An underwriter pulls several quarters of WIP schedules side by side and watches what happened to each job. A shop that consistently estimates 34 percent and delivers 31 is disciplined and slightly conservative, and that is fine. A shop that estimates 38, holds 38 all the way through, and books 19 at closeout is telling the underwriter that its cost-to-complete estimates are not real. Once the underwriter concludes they cannot trust your percent complete, nothing else in the file matters, because the entire percentage-of-completion method rests on that estimate. An underwriter reads heavy fade as a credibility problem with your estimates, and the next quarter's WIP gets read with that in mind.
One more item that gets missed: sureties want a reviewed or audited year-end financial statement prepared by a CPA who runs percentage-of-completion, along with a current internal WIP, an accounts receivable and payable aging, and a personal financial statement from each indemnitor. A compiled statement from a general bookkeeper will get you a small line at best.
This is where restoration contractors get penalized for the shape of their business rather than the quality of it, and knowing the difference lets you get ahead of it.
A bank looks at your WIP and mostly wants to know whether the receivable will convert to cash and when. A surety looks at the same document and wants to know whether you can finish every job on it without running out of money, because the surety's exposure is the cost of completion, not the size of the invoice. Those are different questions and restoration answers them differently than a general contractor does.
Four features of restoration work distort the picture: