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

This submit is a part of a collection sponsored by Old Republic Surety.

If you may have building shoppers who’re in progress mode and wish to tackle greater initiatives, right here’s assist you may share for growing their surety capability — notably if they should transition from a credit-based fast bond program to a normal surety program.

Does your organization have progress targets? Does your organization want extra surety capability to succeed in these targets? Maybe you’d prefer to bid on bigger initiatives, or possibly a longtime buyer needs to rent you for a a lot bigger challenge.

While a normal surety program just isn’t “one size fits all” for each contractor, there are essential steps you may take that will help you graduate from a credit-based fast bond program to a normal, bigger surety program:

• Form a partnership with trusted monetary advisors.This features a construction-oriented CPA, a financial institution that understands building lending, an expert surety agent and, after all, your surety underwriter.
• Increase the standard of your monetary statements.Often, taking your corporation to the subsequent stage requires hiring a construction-oriented CPA to arrange a year-end overview and high-quality monetary assertion. A building CPA will help with stronger inner controls in addition to crafting the mandatory monetary presentation required for maximizing bonding capability.
• Strengthen inner controls and your means to trace cost-to-complete backlog.Standard bond applications require extra refined value programs and monetary data. While a building CPA may help, a certified in-house controller will assist develop and strengthen inner processes and controls. A robust controller will 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 overview.
• Increase frequency of monetary statements. Outside of the fiscal-year-end CPA overview and annual private monetary assertion, additionally, you will want to offer internally ready monetary assertion updates on a quarterly foundation — together with steadiness sheet, revenue assertion, ageing of receivables and work-in-progress (WIP) statements.
• Obtain (or enhance) a financial institution line of credit score.Construction is an unpredictable enterprise that carries substantial danger of unanticipated cost delays. Overall money circulate administration paired with entry to capital is essential for day by day operations and survival of contractors. The 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 earnings within the firm.Sureties prefer to see an organization organically rising its steadiness sheet. They analyze tendencies 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 — finally strengthening your steadiness sheet. As your organization’s retained earnings and web price enhance, you may count on your bonding capability to develop together with it. While retained earnings are necessary, it’s usually mentioned that “cash is king” — as sureties are additionally on the lookout for liquidity and unleveraged capital once they do monetary analyses.

Keeping 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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Contractors