3 Money Leaks That Quietly Hurt Your Bonding Limit

Most contractors focus on revenue growth, but surety underwriters focus on something much simpler: how well you protect your cash and working capital. The challenge is that many construction companies lose bonding capacity through small financial leaks that do not show up immediately on the P&L.

Here are three of the most damaging leaks that quietly reduce your bond line.

1. Job Costing Gaps That Hide True Margins

A project can look profitable on paper and still drain cash if the underlying job costs are incomplete or inaccurate. Common issues include:

• Labor burden not calculated correctly

• Materials recorded late or inconsistently

• Subcontractor invoices hitting the wrong cost code

• Change orders not tracked in real time

When margins fluctuate or disappear without explanation, sureties see instability. Underwriters want predictable performance, and that starts with precise job costing and a clean WIP schedule.

Impact on bonding: Unreliable margins weaken underwriter confidence and reduce available capacity for larger projects.

2. Aggressive Tax Write-Offs That Shrink Working Capital

Tax minimization helps in April but hurts when applying for larger bonds. Overly aggressive write-offs, accelerated depreciation, or running personal expenses through the business reduce:

• Working capital

• Net worth

• Retained earnings

These are three of the biggest drivers of bonding capacity. What looks like tax savings can eliminate the balance sheet strength that sureties require to support higher limits.

Impact on bonding: Lower working capital means smaller single-project and aggregate bond lines.

3. Billing Practices That Create Hidden Cash Flow Stress

Even profitable contractors strain their bonding capacity when billing processes pull cash out of the business. Three common problems:

• Billing late or waiting until the end of the month

• Not front-loading the schedule of values

• Slow follow-up on unpaid invoices

• Over-reliance on retainage-heavy contracts

Cash flow volatility makes it harder to fund labor, materials, and subs on time. Underwriters worry when cash timing looks unpredictable, even if the P&L is strong.

Impact on bonding: Choppy cash flow weakens underwriting confidence and limits how much bonding the surety is willing to extend.

Strengthening Your Bonding Limit Starts With Fixing These Leaks

You do not need a full overhaul to improve bonding capacity. You need clean numbers, consistent processes, and decisions that build working capital over time. Contractors who close these leaks typically see:

• Higher working capital within months

• More predictable gross margins

• Stronger cash flow

• Increased single and aggregate limits

  
  

If you want help cleaning up job costing, improving cash flow, or aligning your financials with what underwriters want to see, SuretyCFO™ can guide the process.