Most public construction work — and a growing share of large private work — requires three kinds of surety bonds: a bid bond (your bid is real and you'll sign the contract if you win), a performance bond (you'll finish the job), and a payment bond (your suppliers and lower-tier subs will get paid). For federal contracts over $150,000, the Miller Act makes performance and payment bonds mandatory on the prime; all 50 states have their own "Little Miller Act" for state and local work. As a subcontractor, you'll need your own bonds when a GC requires them — and you'll rely on the GC's payment bond as your backstop when an invoice goes unpaid. Whether you can get bonded comes down to three things underwriters call the 3 Cs: capital, capacity, and character. This post breaks down each bond, what underwriters actually look at, and the moves that get small and emerging subs bonded faster.

Why bonds matter more than most subs realize

A surety bond is not insurance. Insurance protects you from a loss. A bond protects the project owner from a loss caused by you — and you indemnify the surety for anything it pays out on your behalf. That distinction matters because it explains every weird thing about bond underwriting: why your personal credit gets pulled, why your spouse signs the indemnity agreement, why the surety wants three years of CPA-prepared financials before writing a million-dollar bond.

For subcontractors, bonds show up in two ways:

1. You're asked to post a bond yourself. A GC on a CM-at-risk or large public job requires sub-bonds on critical trades — electrical, mechanical, sitework. No bond, no contract.
2. You're protected by someone else's bond. When the GC fails to pay you on a bonded public project, the GC's payment bond is your fallback — if you file notice correctly and on time.

Both sides of that equation are now part of the basic operating skill set for any sub working above roughly $1M in revenue. The market has hardened. According to Construction Executive's 2026 surety market analysis, underwriting is tighter, documentation standards are higher, and marginal risks face reduced tolerance — carriers reward disciplined financial management with expanded bonding capacity while cutting lines for weak reporting.

Translation: a sub with clean WIP, a real 13-week cash forecast, and a working pay-app cycle gets bonded. A sub running the business out of QuickBooks plus instinct does not.

The three bonds, explained

Bid bond

A bid bond guarantees two things: that your bid is submitted in good faith, and that if you win, you'll execute the contract and post the required performance and payment bonds. If you win and then walk away, the surety pays the owner the difference between your bid and the next-lowest qualified bid — up to the bid bond amount — and then comes after you for reimbursement.

Bid bonds are typically 5–20% of the bid amount, and for qualified contractors they're often free. That "free" is important: it means once you're set up with a surety, posting a bid bond is mostly paperwork, not a fee per submission. This is one of the practical advantages of having a real bonding program — you can bid more work without per-bond friction.

Performance bond

A performance bond guarantees you'll complete the project per the contract terms. If you default, the surety has several options: finance you through completion, hire a replacement contractor, pay the owner the bond penalty, or let the owner re-procure and pay the cost overrun. Both performance and payment bonds on Miller Act federal contracts must equal 100% of the contract price.

The performance bond is where the surety has the most exposure, which is why underwriting is heaviest here. Performance and payment bonds typically cost 0.5–3% of the bond amount for well-qualified contractors. On a $5M contract, that's a $25,000–$150,000 premium range — and where you land inside that range is almost entirely a function of your financials and track record.

Payment bond

A payment bond guarantees that subcontractors and suppliers below the bonded contractor get paid. On federal projects, this matters because federal property generally cannot be liened like a private job, so the Miller Act uses payment bonds to protect subcontractors and suppliers. The payment bond is the substitute for a mechanic's lien on public work.

For a sub working under a bonded GC, the GC's payment bond is your remedy of last resort when you don't get paid. But that remedy is time-limited and notice-dependent, and most subs who lose payment bond claims lose them on a deadline, not on the merits. More on that below.

The Miller Act and Little Miller Acts: who's covered and who isn't

The Miller Act is the federal statute that makes payment and performance bonds mandatory on most federal construction contracts. It's codified at 40 U.S.C. §§ 3131–3134, was originally enacted in 1935 to replace the Heard Act of 1894, and was recodified in 2002 with its core requirements remaining consistent for nearly a century.

The thresholds that matter as of 2026:

• Under $35,000: No federal bonding requirement.
• $35,000 to $150,000: No mandatory payment bond, but the FAR requires alternative forms of payment protection.
• Over $150,000: The Miller Act requires both performance and payment bonds, each equal to 100% of the contract price.

Every state has its own version. All 50 states and DC maintain Little Miller Act equivalents requiring construction bonding, with thresholds ranging from $5,000 in Pennsylvania to $500,000 in Virginia for non-transportation projects. If you work across state lines, the threshold and notice rules change at the border. Don't assume Georgia's rules apply in North Carolina or Florida.

Who can claim against a Miller Act payment bond

This is where subs lose money they're owed — by being on the wrong tier or missing a deadline.

• First-tier subs (you contract directly with the GC) and their suppliers: protected.
• Second-tier subs (you contract with a first-tier sub) and their suppliers: protected, if you provide timely notice.
• Third-tier and below: Payment bond protection under the Miller Act only extends to second-tier subcontractors and suppliers. Those on the third tier, such as a supplier or subcontractor of a second-tier subcontractor, and those even further down the contractual chain do not have a claim against the bond.

If you're a supplier-to-a-supplier or a sub-to-a-sub-to-a-sub, the federal payment bond doesn't help you. Know your tier before you sign.

The two deadlines that kill claims

Miss either one and your claim is gone, regardless of how much you're owed.

1. 90-day notice (second-tier only). Second-tier subcontractors must provide written notice to the general contractor of their claims within 90 days after they last performed work or supplied materials or equipment to the project. This notice must be actually received by the prime contractor by this deadline, not just mailed by the deadline. The notice must be sent by registered mail with a return receipt requested.
2. One-year suit deadline (everyone). A first-tier sub can file suit on the payment bond 90 days after, but no later than one year after, the last labor was furnished or materials supplied. No notice is required prior to bringing suit. Importantly, the 90-day notice deadline and the one-year suit filing deadline begin to run when the last of the services were furnished or the last of the materials were provided as part of the original contract, and these deadlines do not restart if you subsequently furnish labor or materials to correct defects or make repairs on items previously furnished for the federal job. These deadlines also do not restart if you furnish punch list or warranty work or materials for the job.

That last point is the trap. You finished the job in March. You came back in July for punch list. You assume the clock restarted. It didn't. The one-year clock has been running since March.

Track the date of your last original contract work on every bonded job. Put it on a calendar. Put a reminder at month 9, month 11, and month 11.5. Subs lose six-figure claims because nobody put it on a calendar.

How surety underwriting actually works: the 3 Cs

When a sub asks me what gets them bonded, the answer is the same framework every surety in the country uses. Sureties evaluate every contractor on the same three core areas — capital, capacity, and character. The specifics vary by surety company and by the size of the bond, but the three categories are universal.

Capital

Capital is the financial picture. Working capital, net worth, debt-to-equity, cash position, profitability. Surety bond companies usually want to see the company's most recent three years of financial statements. Depending on the size of bond capacity desired, these statements usually need to be CPA prepared. The surety is looking for statements that include a balance sheet, income statement, statement of cash flows, work in progress schedule, completed contract schedule, and notes to the financial statements.

The math underwriters use is rough but real: A contractor with $3 million in working capital might carry primary capacity of $50 to $60 million with a strong track record. That multiple is not fixed. It moves based on everything else in the file — your experience, your systems, your WIP. The often-cited rule of thumb is 10× working capital for aggregate program capacity and 5× for single-project — but those are guidelines, not entitlements.

If your financials are compiled on a tax basis and your WIP schedule is a guess, you're capped at small-bond programs. If you have CPA-reviewed statements on a percentage-of-completion basis with a clean WIP, you're in the conversation for real capacity.

Capacity

Capacity is whether you can actually do the work. Not whether you can win the bid — whether you can finish the job. Underwriters evaluate your experience with similar project types and sizes, the depth of your management team, your equipment and labor resources, your estimating and accounting systems, and your track record of completing bonded work on time and on budget.

If the owner is the only person who can run a project from start to finish, the surety sees a single point of failure. That limits capacity regardless of how strong the financials are. This is the most common ceiling for $1M–$5M revenue subs: the owner is the whole company. Until there's a second project manager or estimator the surety can see in the file, capacity won't grow.

Character

Character is not personality. It's how you handle problems, how you treat partners, and whether the surety can trust what's in your file. Underwriters evaluate your personal and business credit history, your payment track record with subcontractors and suppliers, any past bond claims or lawsuits, tax liens or judgments, and your reputation in the market.

The character signal underwriters watch most closely: contractors who bring issues to the surety's attention proactively — before they become surprises — build trust that pays dividends in bonding capacity over time. The opposite is also true. Try to hide a problem job and the next renewal will be painful.

The SBA Surety Bond Guarantee Program — the path in for small and emerging subs

Most small contractors have never heard of the SBA Surety Bond Guarantee Program. They should have. It exists specifically for subs who can't yet qualify in the standard market.

The mechanics: The SBA does not issue bonds. It guarantees a percentage of the bond to the surety company — meaning if you default on a bonded project, the SBA reimburses the surety for most of the loss. That guarantee changes the math for the surety, which is why a contractor who would normally get declined can get approved through the program.

What's available as of 2026:

• The program guarantees individual contracts of up to $9 million, and up to $14 million for federal contracts if a federal contracting officer certifies that such a guarantee is necessary. The SBA's guarantee currently ranges from 80% to 90% of the surety's loss if a default occurs.
• SBA's Surety Bond Guarantee Program partners with 31 active surety companies represented by more than 80 authorized bonding agencies nationwide.
• In fiscal year 2025 the program backed a record $10.6 billion in bond guarantees for more than 2,200 small businesses.

This is a stepping stone, not a destination. Once you complete bonded projects successfully, you build a track record. Your financials improve. Your surety sees performance history. Eventually, you graduate from the SBA program into the standard surety market with higher limits and a real bonding program. The SBA expects this. Preferred sureties are actually required to have a plan for moving contractors into traditional bonding.

If you're an MWDBE sub, a veteran-owned firm, or simply a smaller company that can't yet show three years of CPA-reviewed financials, this is your on-ramp.

What "bid-ready" actually means: the financial posture sureties want to see

The skeptical version of "bid-ready" — the version that survives an underwriter's review — looks like this:

• Three years of CPA-reviewed or audited financial statements. Tax-basis compiled statements limit your capacity. Reviewed statements on a percentage-of-completion basis unlock it.
• A current, accurate WIP schedule. Updated monthly, not when you remember. Reconciled to the GL. No gainsharing math that doesn't add up.
• A 13-week rolling cash forecast. Develop a 13-week rolling cash flow forecast aligned with project schedules, billing cycles, and major procurement commitments. Demonstrate to underwriters that management anticipates cash crunches in a timely manner.
• Clean A/R aging. No "$400K over 90 days" entries without an explanation and a plan.
• A management team beyond the owner. At minimum, a named project manager and estimator the surety can talk to.
• Personal credit cleaned up. Underwriters pull it. Liens, judgments, and slow-pay history on the owner's personal file all reduce capacity.
• References ready. Bank, two suppliers, two GCs, prior project owners.

This isn't a wish list — it's the file an underwriter is going to ask for. Have it before you need it.

How Breva fits

Breva® is a financial operations platform for SMB construction contractors — $1M to $25M in revenue, the exact range where bonding becomes both essential and hard to qualify for. We don't issue bonds; that's handled by our surety partner. What Breva does is the work that has to happen before an underwriter will give you real capacity: clean WIP, working pay-app cycles, retainage handled, cash plan running, Bonding Score visible, and Ask Bre™ available as an AI CFO to help you read your own financial posture the way an underwriter reads it.

The Breva Score is a 300–850 financial-health score built for contractors — the same idea as a personal FICO, but calibrated to the work-to-cash cycle that drives sub-bond underwriting. If your Breva Score is moving in the right direction, your bonding conversation is moving in the right direction.

This is not financial or legal advice, and your specific bond program will depend on your surety, your state, and the project. Use this post as a map, not a contract.

What to do this week

1. Find out your tier on every active bonded job. First-tier, second-tier, or below. Write it on the job folder.
2. Calendar the one-year clock for every bonded job that finished in the last 12 months. Use the date of last original contract work — not punch list, not warranty.
3. Pull your last three years of financial statements and your current WIP schedule. If they're not CPA-reviewed, that's your next project.
4. Take 10 minutes with the Pay-App Benchmark. It will tell you, free, where your pay-app cycle sits versus other subs your size — the same cycle data underwriters care about.

FAQ

What's the difference between a bid bond, performance bond, and payment bond?

A bid bond guarantees you'll honor your bid if you win. A performance bond guarantees you'll complete the contract. A payment bond guarantees your subcontractors and suppliers will be paid. On federal projects over $150,000, the Miller Act requires both performance and payment bonds at 100% of the contract price.

Do subcontractors need their own surety bonds?

Sometimes. A GC will require sub-bonds on critical trades — electrical, mechanical, sitework — especially on CM-at-risk and large public projects. Even when you don't post your own bond, you're often working under a GC's payment bond, which is your remedy if you don't get paid.

What is the Miller Act threshold in 2026?

The Federal Acquisition Regulation requires performance and payment bonds on federal construction contracts over $150,000. Contracts between $35,000 and $150,000 require alternative payment protections but not full bonds. Contracts under $35,000 have no federal bonding requirement.

How long do I have to file a Miller Act payment bond claim?

You have one year from your last day of original contract work to file suit. Second-tier subcontractors must also provide written notice to the prime contractor within 90 days of their last day of work. Punch list and warranty work do not restart the clock.

How much does a surety bond cost for a subcontractor?

Bid bonds are typically free for qualified contractors. Performance and payment bonds typically cost 0.5–3% of the bond amount for well-qualified contractors. Where you land in that range depends on your financials, experience, and credit.

What is the SBA Surety Bond Guarantee Program?

It's a federal program that guarantees 80–90% of a surety's loss on bonds issued to small contractors who can't yet qualify in the standard market. As of 2026, the program covers contracts up to $9 million ($14 million on federal contracts with a contracting officer certification).

What do surety underwriters look at?

The 3 Cs: Capital (working capital, financial statements, profitability), Capacity (experience, management team, systems, track record), and Character (credit, payment history, claims and lawsuits, references).

Can a sub-subcontractor make a claim on the GC's payment bond?

On federal Miller Act projects, no. Payment bond protection extends only to first-tier and second-tier subcontractors and suppliers. Third-tier and lower have no claim.

Sources

1. 40 USC 3131 Miller Act: Bond Requirements and Thresholds — LegalClarity
2. Miller Act Bonding: Requirements and Waiver — ConsensusDocs
3. Miller Act Bond Requirements (40 U.S.C. 3131-3134) — BuySuretyBonds.com
4. State Bid Bond Requirements Guide 2026 — BuySuretyBonds.com
5. The Miller Act — Grit Insurance
6. What Surety Underwriters Want to See in Your File in 2026 — Grit Insurance
7. Understanding Construction Surety Bonds — ABC Carolinas (2026 Playbook)
8. 3Cs of Contract Surety Bond Underwriting — Axcess Surety
9. Miller Act Payment Bond Claims: The Basics — American Bar Association
10. Know and Meet Your Notice Requirements — ConsensusDocs
11. The Federal Miller Act: The Contractor's Friend — Primerus
12. Understanding the Miller Act's Bonding Requirements — HLL Law
13. SBA Surety Bond Guarantee Program — Congress.gov / CRS Report
14. The SBA Surety Bond Guarantee Program Guide — Grit Insurance
15. SBA's Office of Surety Guarantees Celebrates 2026 Award Winners — SBA.gov
16. The Miller Act Brochure — GSA.gov (PDF)

Not financial or legal advice. Bond requirements, thresholds, and claim procedures vary by jurisdiction and change over time. Date-stamp: [PUBLISH DATE]. Consult your surety agent, attorney, and CPA before relying on the information above for a specific project.

eva® and Ask Bre™ are trademarks of Cadence Financial Group, Inc. DBA Breva.