Help Your Contractor Client Transition from Quick Bonds to a Larger Surety Program

This publish is a part of a sequence sponsored by Previous Republic Surety.

When you have building shoppers who’re in development mode and need to tackle greater initiatives, right here’s assist you’ll be able to share for rising 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 objectives? Does your organization want further surety capability to succeed in these objectives? Possibly you’d wish to bid on bigger initiatives, or possibly a longtime buyer desires to rent you for a a lot bigger challenge.

Whereas a typical surety program isn’t “one measurement matches all” for each contractor, there are essential steps you’ll be able to take that will help 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 building lending, knowledgeable surety agent and, in fact, your surety underwriter.
Enhance the standard of your monetary statements.Usually, taking what you are promoting to the following degree requires hiring a construction-oriented CPA to arrange a year-end evaluate and high-quality monetary assertion. A building 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 refined price methods and monetary info. Whereas a building CPA may also help, a professional in-house controller will assist develop and strengthen inner processes and controls. A powerful controller can even assist put together inner monetary statements which are within the desired format and which are correct and development again to your fiscal-year-end CPA evaluate.
Enhance frequency of monetary statements. Outdoors of the fiscal-year-end CPA evaluate and annual private monetary assertion, additionally, you will want to supply internally ready monetary assertion updates on a quarterly foundation — together with stability sheet, revenue assertion, getting old of receivables and work-in-progress (WIP) statements.
Receive (or enhance) a financial institution line of credit score.Development is an unpredictable enterprise that carries substantial threat of unanticipated cost delays. General money stream administration paired with entry to capital is essential for day by day operations and survival of contractors. Some great benefits of a financial institution line embrace offering capital when a receivable is delayed and supplying you with the power to reap the benefits of reductions from materials suppliers.
Retain income within the firm.Sureties wish to see an organization organically rising its stability sheet. They analyze tendencies and search for regular revenue being retained over a number of years. It’s necessary to stability your tax planning with leaving capital within the enterprise, which can enhance your working capital and net-worth positions — finally strengthening your stability sheet. As your organization’s retained earnings and internet price enhance, you’ll be able to anticipate your bonding capability to develop together with it. Whereas retained earnings are necessary, it’s usually mentioned that “money is king” — as sureties are additionally searching for liquidity and unleveraged capital after they do monetary analyses.

Holding 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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Dan Pope is the Senior Vice President of Underwriting at Old Republic Surety

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