Most construction companies are not going to lose a lot of jobs because of what happens on a jobsite. They lose them on paper long before the bids are submitted.
The paper is called adhesive ability.
At the most practical level, bonding capacity defines the total amount of money a contracting company can incur in unsolicited bids, performance and payment guarantees. For many mid-market companies, bonding ability isn’t an issue… until it is.
In the early stages of growth, project sizes tend to be consistent with financial history. But when revenue growth accelerates Especially after one or two big winsa gap can develop between what a company is prepared to build and what is approved for gluing.
This is where fast-growing companies run into friction. Even with a growing backlog, strong customer relationships, and reliable staff, bonding capabilities can quietly limit the next opportunity. It limits the number of bids that can be submitted, the amount of work that can overlap, or the size of projects a company is allowed to work on.
| In the third and fourth quarters, when many companies prepare to bid for next season’s work, this hidden ceiling becomes more real than ever. Companies that have not reviewed or restructured their bond profiles may find themselves blocked. Not because they can’t do the job, but because their financials don’t reflect the discipline required of underwriters. |
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The remainder of this article explains how to evaluate bonding capabilities, why rapid growth alone does not improve bonding capabilities, and how mid-market companies can develop financial strategies to aggressively expand their bonding capabilities so growth happens not only on the ground but on paper as well.
Bonding power is a door, not a ceiling
Bonding capacity refers to the maximum total dollar value of a contract that a contractor can bond at one time. In effect, it sets a cap on how much work a construction company can do at one time.
It’s often seen as a fixed ceiling: once you reach it, you can’t move forward. In fact, it functions more like a door, with the underwriter acting as the gatekeeper.
| What is a door? |
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| The ceiling is not removable. By contrast, if you present the right evidence, the door opens wider. Evidence of this can often be found in a company’s financial discipline: solid reporting, clean cash flow, and a backlog that proves projects have been completed rather than just started. When these signals are strong, the gate opens wider. If not, scope will shrink even as revenue increases. |
In other words, guarantee capacity has less to do with raw revenue and more to do with the underwriter’s confidence in the way the business is run. This confidence is measured through five core factors (called the 5 Cs), which we explore next. nty is not sitting on endless reserves. They aligned their funding to keep pace with the project.
Why it matters for mid-market construction
Binding capacity is a factor that determines the size of the project that can be undertaken, how many jobs can be run simultaneously, and ultimately how much revenue can be recorded. At the mid-market level, connections often become a silent limiter to growth.
Owners and general contractors do not set their own bonding capabilities. However, what they need is proof that the contractor has the financial strength to deliver, which comes in the form of a bond.
The disparity between revenue growth and bond growth often becomes apparent as companies prepare bids for the upcoming construction season. Contractors who treat bonding as an afterthought risk being marginalized. Those who can do this actively position themselves to take on bigger, more profitable work with confidence.
Why rapid growth creates bonding stress
Rapid expansion is every contractor’s goal, but when a company doubles its backlog or revenue in a short period of time, your bonding capabilities don’t automatically scale to match.
When growth outpaces the evidence, sponsors balk. From their perspective, a company may have a field-ready workforce, but the financial systems, reporting disciplines, and capital structure haven’t caught up. This gap creates problems for underwriters, slowing their willingness to expand capacity
Winning larger jobs requires higher bonding capabilities, but higher bonding capabilities require evidence of successful execution at that scale. Underwriters are reluctant to open the door further until evidence exists.
The tension comes to a head during bond reviews in the third and fourth quarters, when underwriters decide whether fast-growing companies can seize bigger opportunities in the year ahead.
Friction points: Be prepared on site, be prepared on paper
Maybe you’ve seen it before: Growth in the field doesn’t automatically translate into more bonding capacity, or underwriters may interpret financials differently than contractors running jobs in real time.
The result has been a series of friction points, where confidence in the sector has clashed with on-paper caution.
| friction point | what it looks like on set | how it reads on paper |
|---|---|---|
| Assuming capacity growth | Revenues doubled, job opportunities increased, and backlogs increased. | Underwriters see last year’s guaranteed limit, not the self-adjusted cap. |
| Keep withholding tax | The project is profitable, the workers are paid, and the subs are satisfied. | 5-10% of reserves are locked in, making cash flow look weaker than imagined. |
| Backlog and burn rate | A large backlog feels powerful. | Until the project is completed, the backlog counts as a liability rather than earned revenue. |
| Claims and Disputes | In day-to-day operations, minor disputes feel resolved and minor. | Any unresolved claims will remain subject to underwriter review as a “character risk.” |
| Achieve rapid growth without financial cleanup | Revenue jumped from $7 million to $15 million in 2-3 years, a strong momentum. | Systems (bookkeeping, reporting, vendor management) lag, which indicates instability rather than strength. |
Each of these points reinforces the same reality: Bonding ability reflects the underwriter’s trust, not just what the contractor knows they can deliver.
How to improve bonding capabilities (site-matched paper)
Good news? Adhesion ability is not fixed.
With the right financial strategy and operational discipline, mid-market contractors can expand their profile so that underwriters see the same strength as they do on the job site.
Here’s how to continue making progress:
- Clean financials and predictable cash flow: Monthly reconciliation of receivables and retainers demonstrates underwriter discipline, not just revenue growth. It’s less about scale and more about predictability.
- Strong banking and capital positioning: Contractors can point to the flexibility of credit lines, cash reserves, or orderly loan programs. Underwriters see not just cash on hand, but also access to liquidity if needed.
- Professional project management: Delivering on time and avoiding disputes can increase reputation. On-field discipline has as much cohesive value as a clean balance sheet.
- Sequential capital integration into work planning: Treating capital as material or labor (a project in the bid itself) signals foresight. Rather than hoping for cash, it’s better to get funding before the project begins. To the underwriter, this proves that the company can execute on site and on paper.
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| When underwriters see discipline rather than desperation, guarantee capacity expands. A financial structure that matches operational success opens doors. |
In practical terms, this could mean a contractor’s revenue growing from $7 million to $15 million in two years, rather than just showing a larger number. They demonstrated a better system. Each project’s budget is funded before the first bid is submitted, accounts receivable are rigorously tracked, and disputes are resolved quickly. Underwriters don’t see excessive extension; they see readiness. This is what translates growth into larger bond approvals, not just a larger backlog.
Closing and summary: Bonding ability is like a mirror
Bonding capabilities hold up a mirror to a company’s discipline and financial readiness. When you grow rapidly, this reflection determines whether the next leap is possible.
A company can be fully equipped on site, but if underwriters don’t see stability and vision on paper, the door is closed on large projects.
Successful companies are those that proactively manage connections. They keep their financials clean, review capacity mid-cycle, and integrate capital strategies directly into project planning. Underwriters responded to this discipline by approving larger bonds and clearing the way for larger opportunities.
With this approach, bonding capabilities grow in tandem with the business and lay the foundation for leaping into new levels of growth.
