Imagine this: your firm just landed its biggest contract; everyone is ready to get out there and begin working, you just need to secure working capital to help you cover the additional payroll and material expenses. Then you find out that a surety bond is being required by the owner. This makes it seemingly impossible to receive funding and begin the job that will grow your business. Do not fret; there is a solution to your problem! Read on…

Surety Bonds Explained

Let’s start with the definition of a bond as it pertains to the construction industry:

A type of surety bond used by the owners or General Contractors in construction projects to protect against an adverse event that causes disruptions, failure to complete the project due to insolvency of the contractors or subcontractors, or the job’s failure to meet contract specifications.

The difficulty in finding access to working capital using factoring on bonded work depends on who is the bonded party – you or your general contractor?

If You Are Bonded

If your firm is the bonded company, it can be tough to acquire capital, as the bonding company’s rights to the receivables from the Owner or General Contractor supersedes the rights of the lender.

Although it may be difficult, there are companies that specialize in financing for the construction industry, such as CapitalPlus. These experienced companies often have experience in “shifting” rights and opening up the ability to supply working capital for new and larger contracts.

If Your General Contractor is Bonded

But, if your general contractor is the one that is bonded, it is much easier to receive funding. This is because the payments from the bonded GC are basically insured from the bonding company. In this scenario, it works in your favor and makes it easier to increase your cash flow and begin new jobs.

In short, it makes it easier for you to get funding when your GC is bonded than it is if your company. It is much riskier for lenders to fund bonded companies.


All hope is not lost. When you find partners with experience in financing for the construction industry, they will help you navigate these issues. If your firm works on bonded jobs, consider partnering with a funding company, like CapitalPlus, that specializes in the nuance of factoring challenges in the construction industry.

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