What a payment bond is, and whether you can get one alone
A payment bond is a may provide that a contractor will pay their suppliers, workers, and subcontractors. It protects the people who provide materials and labor but don't have a direct contract with the project owner. On many projects, you can get a payment bond without a performance bond — the may provide that the work itself will be completed correctly.
Whether you can obtain one alone depends on who is requiring the bond. Private project owners often ask for payment bonds only. Government agencies — federal, state, and local — typically require both bonds together, or neither. The rules differ by jurisdiction and by contract type.
Key Takeaways
- Private projects frequently require only a payment bond, while government projects usually require both a payment bond and a performance bond together.
- The bond amount for payment is often set at 50 percent of the contract value, though this varies by project and issuer.
- A surety company underwrites the bond based on your credit, financial statements, and project history — not on the project owner's requirements alone.
- Federal projects over $150,000 require both bonds under the Miller Act; state and local thresholds vary widely and may be lower.
- If a project requires both bonds but you can only obtain one, you may be unable to bid or may need to find a different surety willing to write a payment-only bond.
When private projects allow payment bonds alone
Private owners — developers, corporations, property managers — set their own bonding requirements. Many ask for a payment bond only, especially on smaller or lower-risk projects. A payment bond protects their suppliers and workers without the added cost of a performance bond, which is more expensive because it covers the full scope of work completion.
The contract will state what bonds are required. If it names only a payment bond, you can approach a surety company and request one. The surety will evaluate your company's financial health, credit history, and track record on similar projects. They are not bound by what the contract says — they decide whether to write the bond and at what premium.
Some private owners ask for both bonds but will negotiate down to payment only if you explain your situation. This is less common on large projects but happens on renovation work, specialized services, or jobs where the owner has worked with you before.
Federal projects and the Miller Act requirement
The Miller Act requires that any federal construction contract over $150,000 must include both a performance bond and a payment bond. You cannot obtain a payment bond alone on a federal project that meets this threshold. The two bonds must be issued together, typically by the same surety company.
The payment bond under the Miller Act must equal 100 percent of the contract price. The performance bond is also 100 percent. Both are non-negotiable requirements, and a federal agency will not award the contract without them in place before work begins.
If your contract is under $150,000, federal agencies may not require bonding at all, depending on the agency and the type of work. Check the solicitation document — it will specify bonding requirements if they explore.
State and local government projects
States and municipalities set their own bonding rules, and they vary significantly. Some states mirror the Miller Act and require both bonds on projects above a certain threshold — often $50,000 to $250,000, depending on the state. Others require both bonds on all public projects regardless of size. A few allow payment bonds alone on smaller projects.
The contract documents — the bid invitation or request for proposals — will state what bonds are required. If both are named, you will need both. If only a payment bond is listed, you can pursue that alone, though this is uncommon on public work.
Contact the agency issuing the contract directly if the bonding requirement is unclear. They can confirm whether payment-only is acceptable or whether both are mandatory. Do not assume based on project size or type — the rule depends on the specific jurisdiction and sometimes on the funding source.
What a surety company will and will not do
A surety company underwrites the bond based on your company's financial position and experience, not on what the contract requires. If you ask for a payment bond alone and the surety believes the risk is acceptable, they will write it. If they think the project is too large or complex for your company to handle, they may decline or ask for additional collateral.
Sureties often prefer to write both bonds together because it gives them more control over the project and clearer recourse if something goes wrong. Some sureties will write a payment bond alone; others will not. If your regular surety declines, you may need to approach a different company, though this can take time and may result in a higher premium.
The surety will ask for financial statements (usually the last two years), a detailed project plan, references from past clients, and details about your company's experience with similar work. They may also require a personal may provide from the business owner. The cost of the bond — the premium — is typically 1 to 3 percent of the bond amount, depending on your credit and track record.
How bond amounts are set
The contract specifies the bond amount. On private projects, this is often 50 percent of the contract value for a payment bond. On government projects, it is typically 100 percent. Some contracts ask for a different percentage or a fixed dollar amount.
The surety must write the bond for the amount the contract requires. They cannot reduce it based on their assessment of risk — the bond amount is set by the contract, not by the surety's underwriting. What the surety controls is whether to write the bond at all and at what premium.
What happens if you cannot get a payment bond alone
If a project requires both bonds and you can only obtain a payment bond, you have limited options. You cannot bid on the project without both bonds in place. You can ask the project owner whether they will accept a payment bond alone — some will, especially if you offer other assurances like a letter of credit or a higher bond amount. Most will not.
Your other option is to find a different surety company willing to write both bonds. This takes time and may cost more. Contact multiple sureties and explain your situation. Some specialize in higher-risk work or smaller contractors and may be willing to underwrite when others decline.
If you cannot obtain bonding through the traditional surety market, some contractors work with a bonding agent or broker who can access specialty markets. This is more expensive and slower, but it may be your only path to a bonded project if standard sureties have declined.
Frequently Asked Questions
Can I get a payment bond if I have bad credit?
Yes, but it will be harder and more expensive. Sureties look at credit as one factor among several — they also consider your company's financial statements, cash flow, and project history. If you have completed similar projects successfully, some sureties will overlook credit issues. Expect to pay a higher premium and possibly provide collateral or a personal may provide.
Is a payment bond the same as a bid bond?
No. A bid bond guarantees that you will enter into the contract if you win the bid. A payment bond guarantees that you will pay suppliers and workers. They serve different purposes and are often required together on government projects, but a bid bond is not a substitute for a payment bond.
What happens if a supplier files a claim against my payment bond?
The supplier notifies the surety in writing with proof of the debt — invoices, delivery receipts, or a lien notice. The surety investigates the claim. If valid, they will either pressure you to pay the supplier or pay the claim themselves and then pursue you for reimbursement. The surety has the right to recover from you up to the full bond amount.
Do I need a payment bond if I am a subcontractor, not the general contractor?
It depends on your contract. If the general contractor's contract requires a payment bond, that bond protects you as a supplier. If you are a subcontractor and your own subcontractors are working for you, you may need to provide your own payment bond to them or to the general contractor. Check your subcontract language.
Can I get a payment bond for a private project if the owner did not ask for one?
Yes. Some contractors obtain payment bonds voluntarily to protect themselves and their suppliers, even when not required. This is less common but can be useful if you are working with new suppliers or on a large project where cash flow is uncertain. The surety will still underwrite based on your company's financial health.