Surety Bonds in Ontario: The Fastest Way to Lose a Contract is to Not Have Bonding Ready
If you are bidding commercial or public work in Ontario, bonding is not a nice to have. It is often a gate. Without it, you can be the best contractor in the room and still get rejected before pricing is even reviewed.
Surety bonds are a credit based guarantee. They help project owners, municipalities, and general contractors manage the risk that work will not be completed, that subcontractors will not be paid, or that the contract terms will not be honoured.
This guide explains how surety bonding works in Ontario and across Canada, what owners typically require, and how to get bond ready before the next bid closes.
What is a surety bond
A surety bond is a three party agreement:
• The principal is your company, the contractor who is obligated to perform • The obligee is the owner, municipality, or general contractor who requires the bond • The surety is the bonding company that backs the guarantee
If a bond claim occurs, the surety may respond to the obligee and then seek recovery from the principal. That is why surety is underwritten like credit, not like insurance.
The most common bonds in construction
Bid bond Shows you will enter the contract and provide required performance and payment security if awarded.
Performance bond Guarantees completion of the contract in accordance with the terms.
Labour and material payment bond Protects subcontractors and suppliers by guaranteeing payment for labour and materials on the bonded project.
Maintenance bond Covers certain defects or warranty obligations for a defined period after completion.
Why bonding matters in Ontario and across Canada
Bonding requirements are common on:
• Municipal and provincial infrastructure in Ontario, including GTA work • Institutional owners such as hospitals and universities • Large private developers and condominium projects • General contractors that want payment protection and fewer disputes • Canada wide contractors working across provinces under standardized contract templates
The trend is simple. Owners want more certainty. Bonding is how they buy it.
What sureties look at when approving your bond program
Surety underwriting focuses on whether your business can finish the work and withstand setbacks.
Key inputs include:
• Financial statements and working capital • Net worth and liquidity • Profit history and backlog quality • Project management controls and safety culture • Experience with similar project size and scope • Credit history of the business and key owners • Banking support and lines of credit
If you wait until a bid is due, you rarely have time to fix the items that matter.
How to become bond ready before bid day
1. Build a simple bonding package Include financials, backlog schedule, work in progress schedule, and a clear resume of completed projects.
2. Align your insurance and bonding Owners often request both. A clean commercial insurance program improves confidence and reduces friction.
3. Manage your backlog intentionally Sureties care about concentration risk and whether your team can deliver.
4. Keep your financials current Interim statements matter when you are growing or taking on larger work.
FAQ
Is a surety bond the same as insurance No. Insurance transfers risk. Surety guarantees performance and expects reimbursement if a loss occurs.
How long does it take to get a bond If you are prepared, it can be quick. If you are not prepared, it can take weeks because underwriting is credit based.
Can smaller contractors get bonding in Ontario Yes, but the program structure matters. The right approach depends on financial strength, experience, and contract type.
Bond Readiness Call
If you have a bid coming up in Ontario or anywhere in Canada, do not wait for the deadline. Send us your latest financials and a backlog summary. We will tell you what bond capacity you can realistically obtain and what to fix to increase limits.