Early in my underwriting career, it wasn’t unusual to meet a company owner who had recently climbed down from a ladder or the seat of a bulldozer to start a construction company. They knew how to build, and they learned how to run the business after they started it. It wasn’t unusual for them to explain how they struggled in the first few years before they figured things out to qualify for surety credit on their own. In that era, the construction business was less sophisticated, and the barrier to entry was lower. Reputation, by word of mouth, counted as much or more than capitalization.
However, the failure rate of new contractors over the years is rivaled only by that of new restaurants. As a result, it’s understandable that surety companies are hesitant to consider a start-up company for a surety program.