contractor holding his bid documents for tender date


Surety bonds are a form of protection for contractors, public service providers, medical centers, government entities, businesses, and contractors.

They are also highly popular among consumers. Surety bonds protect consumers and the aforementioned professionals from becoming victims of fraud.

While something as innocent as a breach of contract does not seem like a big deal, it could very well be a case of fraud. You would be surprised by how many public service providers prey on vulnerable consumers. With a surety bond, the consumer will be fully protected from fraud.


In order to obtain a bid bond, there are numerous steps that must be followed. These include: knowing the details of bid bonds, filling out the application form accurately, and passing the background checks. However, it is important to note that the turnaround time to obtain a bid bond varies across surety companies. As such, do your research in advance to ensure that you can obtain a bid bond as quickly as possible.


There are hundreds of underwriters, also known as sureties and surety companies, all across the state of Texas. These services offer construction surety bonds to all the aforementioned professionals and entities. When consumers hire businesses in high-risk industries, it can make them very vulnerable to fraud. Without a surety bond, there are no guarantees that consumers will not get scammed. To learn more about surety bonds in detail, please take a look at surety bonds for construction projects.

When it comes to a bid bond, it protects consumers when throughout the bidding process. This process is utilized to ensure fairness for a consumer and a group of contractors. Each contractor delivers a bid, the predicted amount of a project, to the project manager (obligee). On the deadline date, the project manager will go through the bid to determine which will offer the best deal. The lowest bid is not always picked because of one reason or another. 

Before a bid can be turned in, the contractor must be covered under a bid bond. To obtain a bid bond, the contractor must undergo an extensive approval process by an underwriter. As mentioned previously, there are hundreds of Texas-based underwriters, most or all of which offer bid bonds. 

In-depth research is the only way to ensure a contractor finds a reputable underwriter. The research should include customer reviews, surety bond history, and license data, all of which will point to a trustworthy surety company. Once you find an underwriter, it will be time to initiate the bid bond application process.

To learn more about this in detail, please take a look at the following links:

  Meaning of Bid Bonds

  Bid Bonds in Construction

  Purpose of Bid Bonds

  How Does a Bid Bond Work?


Each underwriter has a unique application process, which begins with an application. The contractor must complete the application and submit it to the underwriter to initiate the pre-approval process. This process is not just about completing a bid bond application; it will determine if the applicant (contractor) is fully capable of taking on and completing the project.

Some questions to expect to see on a bid bond application include:

1. Business start date

2. Number of employees

3. Financial provider information

4. Business ownership information

5. Equity in businesses

6. Business type

7. Project information

8. Service area(s)

9. Marital status

10. Breach of contract history

11. Previous surety bond complaints

All of these questions must be answered correctly and honestly. Even if you believe it is possible to get by with inadequate, false information, the underwriter will catch on through extensive research.

The completed bid bond application must be accompanied by tax returns and other financial documents.


During the pre-approval process, the surety runs a background check, reviews the application, and verifies the information provided by the application. While many underwriters run public ads promising to provide 24- to 48-hour results, it is not possible. 

The pre-approval process is so complex that it can take anywhere between a few days to several weeks to complete. Depending on the applicant, the process could very well take longer. This is especially true if the applicant skips a question or fails to provide the underwriter with all the requested documents.

The underwriter requests the applicant’s credit report from the three main reporting agencies – TransUnion, Experian, and Equifax. The applicant’s financial records are reviewed carefully and all other information is verified by the underwriter.


Once all the information provided by the applicant is reviewed and verified, it will be time for the underwriter to make a decision. However, it is not unusual for an underwriter to reach back out to an applicant to request more information. In fact, this happens more often than one might think. This is especially true when the underwriter finds something in the applicant’s reports that draws a red flag.

When this happens, the underwriter will reach out to the applicant in hopes of eliminating any issues that could result in a bid bond denial. Underwriters do not approach the pre-approval process with denial in mind. In fact, most try to avoid refusals as often as possible because they are not good for business.


Underwriters minimize their risks through expensive pre-approval processes and research. With the help of the applicant, the underwriter can complete the process within a few days or weeks in most cases. Once the pre-approval process comes to an end, the underwriter must make a decision. At this point, you will receive an answer, whether it is an approval or denial will depend on the information obtained from the pre-approval process.

All bid bond applicants hope to get approved. Unfortunately, this is not always the case. There are several factors that can lead to a denial response. These factors include overextension, low credit scores, a history of contract breaches, and lack of financial presentation. Also, another key factor could be,  contractors that have no previous surety bonding history.

The applicant must prove to the underwriter that he/she is fully capable of taking on a specific project. An approval is exactly what you are looking for while rejections are hard to swallow. Can a rejection letter be appealed?


If your bid bond application is approved, you are free to start bidding. If not, you will probably wonder what to do next. Every applicant has the option to appeal their rejection. This will not be easy, but it is still possible with the help of a good attorney.

Take your denial to an attorney that specializes in bail bonds to see if you have options. It is important to note upfront that some denials cannot be turned around. In this case, the applicant’s best option is to find an underwriter who works with high-risk cases. 

Your appeal letter should include an explanation targeting the reason why you were denied. Include a Request of Reconsideration along with the appeal letter. Submit the appropriate documents to the underwriter in a timely manner. Do not wait too long for a response because most underwriters will not touch untimely bid bond appeals.


Some surety firms offer high-risk bid bonds with the appropriate collateral. It is also possible for contractors to partner with other contractors to get approved for a bid bond. Nothing is impossible, so do not give up as soon as you receive your rejection letter. 

The first step to getting a high-risk bid bond is completing an application. It is always a good idea to include the denial letter along with your application. However, you must be prepared to provide the underwriter with the appropriate collateral when going this route. 

High-risk surety bonds have shown to be very beneficial after a rejection. But, with benefits, there are also a few downsides. One particular downside that comes to mind when speaking of high-risk bid bonds is higher premiums. Yes, that’s right, high-risk applicants will have to pay higher premiums just to get bonded.

While higher premiums are hard to swallow, the unwillingness to pay more will only result in a second rejection from another surety company.


It cannot be stressed enough the importance of being prepared to pay higher premiums when applying for a high-risk bid bond. This is very unfortunate for high-risk applicants. 

Underwriters never forget their risk exposures, which are doubled when working with high-risk contractors. To minimize these risks, surety companies utilize complex pre-approval processes and higher premiums that are based on the applicant’s business history.

If you have been classified as a high-risk bid bond applicant, you can expect to see higher premiums than normal. This is just part of the process that every high-risk applicant must be prepared to deal with when applying for a bid bond.

A high-risk contractor’s premium will depend on his/her bid bond penal sum. Generally, the amount ends up being a small percentage between 5 and 20 of the applicant’s bond penal sum, which is between 10 and 20 percent of the contract amount. You can do the math if you know the total amount of your contract. Divide this number by 20 percent to get your penal sum. Then divide that amount by an additional 20 percent to determine your premium.


Unlike what some contractors believe, obtaining a bid bond is a lot of work from all parties included in the contract. The contractor (the principal) is responsible for obtaining the bid bond through a pre-approval process. Start by completing a bid bond application and follow up with the retrieval of the requested financial documents. If you have any questions, you can contact Stokes Surety Bonds. You will be paired with a bid bond expert to resolve any issues you are facing with the application.