What are typical financial requirements for obtaining a surety bond?

The typical financial requirements for obtaining a surety bond include providing financial statements and, when necessary, collateral. Surety companies use these financial documents to assess the creditworthiness and financial stability of the principal (the party seeking the bond).

Financial statements, such as balance sheets, income statements, and cash flow statements, give the surety a comprehensive view of the principal's financial situation. This information helps determine whether the principal can fulfill their obligations if a claim is made against the bond.

Collateral may be requested if the surety company deems the risk too high based on the evaluation of the financial statements. Collateral serves as an additional layer of security for the surety, ensuring that they have a means to recover losses if the principal fails to meet their obligations.

This focus on financial stability is central to the surety bonding process, as the surety must mitigate their risk while underwriting the bond.