A Letter of Bondability, also known as a Good Guy letter or Sunshine Letter, has been around for a long time. Over the years, these letters have become stricter on what is required. In the past, agents would be able to prepare this letter on their own letterhead. However, because these letters were so easily accessible, plus the agent’s hopeful opinion, it left some unrealistic representations of contractors, and not what they truly could qualify for. . Now, this letter is usually provided by the surety company or their representative, along with a power of attorney. This gives a reliable representation of the surety’s approval of surety credit.
A Letter of Bondability has many functions, and often gets mistaken for a prequalification for a certain job or a promise that a contractor will be able to get a bond for a certain job. That is not the case. A letter is not a bond, nor a promise of any kind. It is also not an obligation to provide further related bonding, which is the function of a bid bond.
Bondability letters will show that a contractor is in good standing with a surety, and for how long. It will state the general bonding limits the contractor would be considered and give the financial strength rating of the Surety and whether the Surety is on the Federal Circular 570, aka T-listing. It does not suggest that the surety has gone through the prequalification process of an individual job, nor is the letter promising that the contractor or a specific job can be bonded.
Sureties will also state in their letters that issuing bonds is a matter between the contractor and the surety, and each request will be subject to standard underwriting and the letter itself is not a legally binding document.
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