Bonding capacity is how much bonded work a surety company is willing to back for you. It’s usually expressed as two limits: a single-job limit and an aggregate limit for all bonded work on hand. Public jobs almost always require performance and payment bonds, so bonding capacity directly caps how much public work you can pursue.
Why it matters
Sureties underwrite the “three Cs”: capital, capacity and character. In practice, they study your CPA-prepared financial statements, working capital, equity, WIP schedule, backlog and history of fade. A widely cited rule of thumb sets aggregate capacity at roughly 10 to 20 times working capital, but every surety sets its own terms. A WIP schedule full of under billings or fading margins can shrink capacity fast, even if revenue is growing.
Worked example
Illustrative: a contractor with $6M of working capital might be offered a $90M aggregate program and a $40M single-job limit. Riverside Medical Center at $49.3M would already exceed that single-job limit, so the contractor would need a stronger balance sheet, a joint venture or a special approval from the surety. Three fading jobs on the year-end WIP would make that conversation harder.
Common mistakes
- Treating the surety as a once-a-year conversation instead of sharing quarterly WIP and early warnings.
- Carrying large under billings that the surety discounts as unreliable assets.
- Taking on backlog that outruns working capital.
How os.construction handles it
We’re building WIP, backlog and fade reporting on live data, so the package your surety sees is current and consistent. We’re not a surety and don’t set bonding limits.