Why was my surety bond application declined?
Common reasons can include weak financial performance, insufficient working capital, contract size, existing workload, onerous bond wording, limited trading history, security concerns or simply the appetite of the market approached.
Does one declined bond application mean all sureties will decline?
Not necessarily. Different markets can have different underwriting appetites. However, some underlying issues may concern more than one provider, so the reason for the decline should be understood first.
Can a bond be obtained after a previous decline?
Potentially, but there is no guarantee. Updated information, additional explanation, a different structure or an alternative market may change the outcome in some cases.
Can negative net assets cause a surety bond to be declined?
They can be a significant underwriting concern, but the reason for the deficit, current trading, group support, funding and overall contract position may also be relevant.
Can losses in the latest accounts cause a bond application to fail?
Losses can affect underwriting, particularly where they appear persistent or have weakened liquidity. An underwriter may also consider why the loss occurred and what current trading looks like.
Can a surety decline because the contract is too large?
Yes. A project materially larger than those previously completed may create concerns about resources, funding, management capability and concentration of risk.
Can too much work in progress cause a decline?
It can. A strong contractor may still become operationally or financially stretched if too many large projects are being delivered at the same time.
Can bond wording cause an application to be declined?
Yes. On-demand, heavily amended or otherwise onerous wording may fall outside a surety's appetite even where the applicant itself is financially strong.
Can a new company or SPV be declined because it has no trading history?
Yes, limited standalone history can make underwriting more difficult. Wider group support, management experience, funding and project structure may become particularly important.
Can refusal to provide a personal guarantee cause a bond to be declined?
If a particular market considers a personal guarantee necessary, refusal may mean that market will not proceed. Another market may take a different view, but this depends on the complete underwriting position.
Can refusal to provide cash collateral cause a decline?
It can where collateral is a specific condition of that market's approval. Whether another structure is available depends on the applicant and alternative surety appetite.
Should I submit the same declined application to lots of sureties?
Usually it is better to understand the reason for the original decision first. Repeating an incomplete or poorly explained submission does not address the underlying underwriting concern.
Can updated management accounts help after a decline?
They can be useful where the latest filed accounts no longer reflect the current position. Whether they change the decision depends on what the updated figures show and the reason for the decline.
Can parent-company support help a declined bond application?
Potentially. Where the applicant sits within a stronger group, wider financial support may be relevant to the underwriting structure.
Can an existing surety facility still decline an individual bond?
Yes. Facilities normally operate within agreed parameters, and an individual requirement may still fall outside those parameters because of size, wording, beneficiary, contract type or changing financial circumstances.
How quickly can a declined bond be reconsidered?
Timing depends on the complexity of the case and whether the information needed to understand the decline is available. A complete submission can generally be assessed more efficiently than one requiring repeated clarification.