Can a company with negative net assets obtain a surety bond?
Negative net assets can make underwriting more challenging, but the cause of the position, current trading, funding, group support and contract circumstances may all influence how a market views the case.
Can a loss-making company obtain a surety bond?
Potentially. An underwriter may want to understand why the loss occurred, whether it was exceptional or recurring, and what the current trading position looks like.
What information does a surety underwriter normally require?
Typical information can include company details, accounts, management information, contract details, bond wording, existing workload and outstanding bond exposure.
Does turnover determine how much bond capacity a company has?
Not by itself. Profitability, liquidity, working capital, contract concentration, work in progress and outstanding bonds may also influence available capacity.
Does cash in the bank matter to a surety?
Liquidity can be relevant because contracts require working capital, but cash is normally considered alongside wider assets, liabilities, funding and trading performance.
What if the new contract is much larger than previous contracts?
The underwriter may ask how the business will finance, resource and manage the increased exposure and whether the management team has experience of delivering similar work.
Does work in progress affect surety capacity?
It can. Existing workload helps show the applicant's aggregate operational exposure and whether additional contracts could place pressure on resources or working capital.
Will a surety consider the wider company group?
It may, particularly where the applicant has limited trading history or weaker standalone financial strength. Parent-company support and wider group resources can therefore be relevant.
Can a new company or SPV obtain a surety bond?
New companies and SPVs can sometimes be considered, although underwriters may need to look beyond the applicant itself to management experience, funding, ownership and group support.
Does bond wording affect the underwriting decision?
Yes. The wording defines the surety's obligation and the circumstances in which a claim may arise. Conditional, on-demand and bespoke wording can therefore result in different underwriting considerations.
Will directors always need to provide a personal guarantee?
No. Security requirements vary between markets and cases. Some requirements may proceed with corporate indemnity only, while other circumstances may lead to additional support being requested.
Can cash collateral be required for a surety bond?
It can be requested in some circumstances, but it is not a universal requirement. The level and form of security depend on the applicant, market and risk being considered.
Can another surety consider a case after one market has declined?
Potentially. Different surety markets have different underwriting appetites, so a previous decline does not automatically mean all markets will reach the same conclusion.
How long does surety underwriting take?
Timing depends on the complexity of the case, quality of information available, wording and market. Complete information generally allows a case to progress more efficiently.
Do existing bonds reduce future bond capacity?
Outstanding bonds form part of the overall exposure being supported. Whether they restrict new capacity depends on the wider financial position, workload and limits available.
Does the beneficiary of a bond matter?
It can. The beneficiary, contractual structure and wording help define the obligation the surety is being asked to support.