Bonding capacity

Definition

What the company may have under contract at once, which in one state is printed on its license.

Why It Matters

Three instruments get blurred here and they behave differently. The license bond is a fixed penal sum protecting the state and consumers, four thousand dollars for a Washington electrical contractor and capped there for the life of the bond, so it says nothing about capacity. Performance bonds on public work create the demand for capacity, because the federal rule requires them above a hundred thousand dollars and the states copy it. Capacity itself is a surety's private judgement, with one exception worth knowing before an offer: Nevada's board sets an aggregate monetary limit on the license, the maximum combined value of all contracts the contractor may hold at any one time. Where that applies the ceiling is a public fact. None of it travels with the business, because the limit is measured again against the new owner's balance sheet.