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

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

When you’ve got building purchasers who’re in progress mode and wish to tackle larger initiatives, right here’s assist you possibly can share for growing their surety capability — notably if they should transition from a credit-based fast bond program to a typical surety program.

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

Whereas a typical surety program will not be “one measurement 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:

• Type a partnership with trusted monetary advisors.This features a construction-oriented CPA, a financial institution that understands building lending, an expert surety agent and, in fact, your surety underwriter.
• Improve the standard of your monetary statements.Usually, taking your enterprise to the following degree requires hiring a construction-oriented CPA to arrange a year-end evaluation and high-quality monetary assertion. A building CPA will help with stronger inside controls in addition to crafting the mandatory monetary presentation required for maximizing bonding capability.
• Strengthen inside controls and your capability to trace cost-to-complete backlog.Customary bond applications require extra subtle value techniques and monetary info. Whereas a building CPA may help, a certified in-house controller will assist develop and strengthen inside processes and controls. A robust controller may even assist put together inside monetary statements which are within the desired format and which are correct and pattern again to your fiscal-year-end CPA evaluation.
• Improve frequency of monetary statements. Exterior of the fiscal-year-end CPA evaluation and annual private monetary assertion, additionally, you will want to supply internally ready monetary assertion updates on a quarterly foundation — together with stability sheet, earnings assertion, growing old of receivables and work-in-progress (WIP) statements.
• Acquire (or enhance) a financial institution line of credit score.Development is an unpredictable enterprise that carries substantial danger of unanticipated fee delays. General money circulate administration paired with entry to capital is essential for every day operations and survival of contractors. Some great benefits of a financial institution line embrace offering capital when a receivable is delayed and providing you with the flexibility to benefit from reductions from materials suppliers.
• Retain earnings within the firm.Sureties prefer to see an organization organically rising its stability sheet. They analyze developments and search for regular earnings being retained over a number of years. It’s necessary to stability 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 stability 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 typically mentioned that “money is king” — as sureties are additionally searching for liquidity and unleveraged capital after they do monetary analyses.

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

Matters
Contractors