Bonding capacity refers to the maximum amount of work a contractor can undertake at one time, as determined by their surety bond provider. It represents the contractor’s financial strength and reliability.
Types of Bonds in Construction
- Bid Bond – Ensures the contractor will honor their bid.
- Performance Bond – Guarantees project completion.
- Payment Bond – Ensures subcontractors and suppliers are paid.
How to Increase Bonding Capacity
- Maintain strong financial records and cash flow.
- Build a solid track record of completed projects.
- Work with a reputable surety company.
Related Terms: Surety Bond, Performance Guarantee, Creditworthiness, Financial Statements
FAQs
Why is bonding capacity important for contractors?
A: It determines the size and number of projects they can bid on and complete.
How does bonding capacity impact project selection?
A: Contractors with higher bonding capacity can take on larger, more complex projects.