Bonding capacity (also referred to as your bond line) is the pre-approved dollar amount of contract bonds that you are able to get for all jobs cumulatively.
Your single limit is the largest bond you can get for one job. Your aggregate limit is the total amount of bonded work you can have at a given time for all your projects combined.
Active jobs count against your bond line whether you are awarded bids or not, making it imperative to communicate with your bond agent the results of all submitted bids.
A Simple Bond Line Illustration
You have a $1,000,000 over $2,000,000 bond line.
The $1,000,000 single limit would allow you to work on jobs no larger than $1,000,000. Your $2,000,000 aggregate limit would allow you to work on two jobs of $1,000,000, four jobs of $500,000, eight jobs of $250,000, etc. at the same time.
Strong Financials Correlate With Higher Bond Limits
When a surety company is underwriting a performance bond, your financial statements will be reviewed to help them determine if you can financially take on projects with higher bonding requirements.
Your financial statements must show sufficient working capital, cash flow, equity and profit for a surety company to give you a higher bond line.
When providing your financial statements to a surety company, it’s beneficial to you to consult with a construction CPA, as they will be competent on industry standards and will be able to present your company appropriately when requesting to increase your bond limits.