Publish Date: August 9, 2023
Author: Will Chapman
Tags: Blog - SeubertU

Surety Made Simple: Underwriting Capital

By Will Chapman, Sr. Vice President of Surety Bonding

In our previous article, we examined the first two of the three C’s of suretyship – character and capacity.  Now, let’s breakdown the final C, capital.

refers to a contractor’s ability to successfully manage its ongoing operations and meet its current and future financial obligations.  While all three C’s are important, the third C—capital, is usually more heavily weighted when determining the contractor’s surety capacity, rates, and terms.  The surety will focus on corporate financial analysis, job schedule analysis, and personal financial statement analysis.  For larger and/or well-capitalized companies, personal guarantees may not be required.  In those cases, the focus will be solely on the corporate financials and job schedules.

Some of the main financial drivers that will provide comfort to sureties and allow them to provide aggressive terms include:

  • Consistent profitability
  • Debt-to-equity less than 1.5 to 1
  • Stronger than needed working capital and equity, as evaluated in relation to total backlog and the surety credit desired
  • A clean balance sheet with a favorable composition – for example, $2,000,000 of cash will always be treated more favorably and aggressively than $2,000,000 in under-billings.
  • Strong banking support with a consistent bank line of credit availability
  • Excellent history of profitable completed projects and consistent profit trends on jobs
  • Where applicable, strong personal balance sheet strength and liquidity


Some of the biggest financial red flags for a surety underwriter include:

  • Large net losses
  • Inconsistent profitability
  • Debt-to-equity ratios greater than 3 to 1
  • Low levels of working capital, relative to total backlog and surety needs
  • Collection and change order issues
  • Unusually large under-billings
  • Consistent high usage of the bank line of credit


Unlike insurance, the surety industry does not expect losses and underwrites to a 0% loss ratio.  By nature, this makes the underwriting process comprehensive and conservative.

To learn more about Seubert’s unique approach to surety bonding, check out our recent Q2 Seubert Panel, where I discuss the importance of our process from a CFO’s perspective.  Or reach out to [email protected] or call 412-734-4900 to get in touch with a member of Seubert’s surety team today!

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Will Chapman is the Senior Vice President of Seubert’s Surety Bonding operation. He joined the agency in April of 2022 and has more than 18 years of industry experience. In his current role, Will is responsible for business development and nurturing customer relations, department production, and further expanding Seubert’s footprint.