How Much Do Surety Bonds Cost for Contractors?

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What Determines Your Bond Rate

Bond rates are primarily driven by credit score and financial strength. For license bonds: 1–3% for good credit, 5–15% for bad credit. For performance and payment bonds: 0.5–1.5% for well-qualified contractors with strong financials; 2–3% for smaller or newer contractors; 3–5%+ for high-risk or bad-credit applicants.

License Bond Costs

A $10,000 license bond at 1% costs $100/year. At 2%, $200/year. A $25,000 license bond at 1.5% costs $375/year. License bonds are among the most affordable compliance costs a contractor faces. Even at bad-credit rates (10%), a $10,000 bond is $1,000/year.

Performance and Payment Bond Costs

Performance and payment bonds are priced on a sliding scale based on contract value. Typical rates for qualified contractors: 0.5–1% on the first $500K; 0.75–1.5% on the next $2M; 0.5–1% on amounts over $2.5M. A $1M contract with a 1% rate = $10,000 in combined P&P bond premium.

Factors That Lower Your Rate

Strong personal and business credit (700+), audited or reviewed financial statements, profitable track record with no bond claims, established surety relationship, adequate working capital relative to bonded backlog, and low debt-to-equity ratio all support lower bond rates.

What a Bad-Credit Bond Costs

Contractors with credit below 600 pay significantly more, 5–15% for license bonds, 3–6% for performance bonds (if available at all). A $10,000 license bond at 10% is $1,000/year. A $500,000 performance bond at 5% is $25,000. Improving credit is the most direct path to lower bond costs.