Assist Your Contractor Consumer Transition from Fast Bonds to a Bigger Surety Program

This put up is a part of a collection sponsored by Outdated Republic Surety.

If in case you have development purchasers who’re in development mode and wish to tackle larger tasks, right here’s assist you possibly can share for growing their surety capability — significantly if they should transition from a credit-based fast bond program to a typical surety program.

Does your organization have development targets? Does your organization want further surety capability to succeed in these targets? Perhaps you’d wish to bid on bigger tasks, or possibly a longtime buyer needs to rent you for a a lot bigger challenge.

Whereas a typical surety program shouldn’t be “one dimension matches all” for each contractor, there are essential steps you possibly can take that can assist you graduate from a credit-based fast bond program to a typical, bigger surety program:

  • Kind a partnership with trusted monetary advisors.This features a construction-oriented CPA, a financial institution that understands development lending, knowledgeable surety agent and, in fact, your surety underwriter.
  • Enhance the standard of your monetary statements.Typically, taking what you are promoting to the subsequent degree requires hiring a construction-oriented CPA to organize a year-end overview and high-quality monetary assertion. A development CPA will help with stronger inner controls in addition to crafting the required monetary presentation required for maximizing bonding capability.
  • Strengthen inner controls and your capability to trace cost-to-complete backlog.Normal bond applications require extra subtle price techniques and monetary data. Whereas a development CPA can even help, a professional in-house controller will assist develop and strengthen inner processes and controls. A robust controller can even assist put together inner monetary statements which are within the desired format and which are correct and pattern again to your fiscal-year-end CPA overview.
  • Enhance frequency of economic statements. Exterior of the fiscal-year-end CPA overview and annual private monetary assertion, additionally, you will want to supply internally ready monetary assertion updates on a quarterly foundation — together with steadiness sheet, revenue assertion, growing old of receivables and work-in-progress (WIP) statements.
  • Receive (or enhance) a financial institution line of credit score.Building is an unpredictable enterprise that carries substantial danger of unanticipated fee delays. Total money move administration paired with entry to capital is vital for each day operations and survival of contractors. The benefits of a financial institution line embody offering capital when a receivable is delayed and providing you with the power to make the most of reductions from materials suppliers.
  • Retain earnings within the firm.Sureties wish to see an organization organically rising its steadiness sheet. They analyze developments and search for regular revenue being retained over a number of years. It’s necessary to steadiness your tax planning with leaving capital within the enterprise, which is able to enhance your working capital and net-worth positions — in the end strengthening your steadiness sheet. As your organization’s retained earnings and web value enhance, you possibly can count on your bonding capability to develop together with it. Whereas retained earnings are necessary, it’s usually stated that “money is king” — as sureties are additionally on the lookout for liquidity and unleveraged capital once they do monetary analyses.

Protecting surety {qualifications} high of thoughts as a part of your scaling technique will assist set the stage for ongoing eligibility for bigger bonds.


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