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

This submit is a part of a sequence sponsored by Outdated Republic Surety.

When you have development shoppers who’re in development mode and wish to tackle larger initiatives, right here’s assist you possibly can share for rising their surety capability — significantly if they should transition from a credit-based fast bond program to a normal surety program.

Does your organization have development objectives? Does your organization want further surety capability to achieve 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 venture.

Whereas a normal surety program just isn’t “one dimension matches all” for each contractor, there are crucial steps you can take that can assist you graduate from a credit-based quick 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 development lending, knowledgeable surety agent and, in fact, your surety underwriter.
  • Improve the standard of your monetary statements.Usually, taking your online business to the following stage requires hiring a construction-oriented CPA to organize a year-end evaluate 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 skill to trace cost-to-complete backlog.Commonplace bond applications require extra subtle value techniques and monetary info. Whereas a development CPA can even help, a certified in-house controller will assist develop and strengthen internal processes and controls. A powerful controller may also assist put together internal financial statements which can be within the desired format and which can be correct and pattern again to your fiscal-year-end CPA evaluate.
  • Improve frequency of economic statements. Exterior of the fiscal-year-end CPA evaluate 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, 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 cost delays. General money circulate administration paired with entry to capital is essential for each day operations and survival of contractors. The 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 income within the firm.Sureties wish to see an organization organically rising its steadiness sheet. They analyze traits and search for regular revenue being retained over a number of years. It’s vital to steadiness your tax planning with leaving capital within the enterprise, which can enhance your working capital and net-worth positions — in the end strengthening your steadiness sheet. As your organization’s retained earnings and internet price enhance, you possibly can count on your bonding capability to develop together with it. Whereas retained earnings are vital, it’s usually stated that “money is king” — as sureties are additionally in search of liquidity and unleveraged capital once they do monetary analyses.

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


Was this text invaluable?

Listed below are extra articles it’s possible you’ll take pleasure in.

All in favour of Contractors?

Get computerized alerts for this matter.