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

This publish 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 greater tasks, right here’s assist you’ll be able to share for rising their surety capability — notably if they should transition from a credit-based fast bond program to a regular surety program.

Does your organization have progress targets? Does your organization want further surety capability to achieve these targets? Possibly you’d wish to bid on bigger tasks, or possibly a longtime buyer desires to rent you for a a lot bigger venture.

Whereas a regular surety program is just not “one measurement suits 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 regular, bigger surety program:

• Form a partnership with trusted monetary advisors.This features a construction-oriented CPA, a financial institution that understands building lending, knowledgeable surety agent and, after all, your surety underwriter.
• Improve the standard of your monetary statements.Typically, taking your small business to the following degree requires hiring a construction-oriented CPA to organize a year-end evaluation and high-quality monetary assertion. A building CPA will help with stronger inside controls in addition to crafting the required monetary presentation required for maximizing bonding capability.
• Strengthen inside controls and your capability to trace cost-to-complete backlog.Normal bond packages require extra subtle price methods and monetary data. Whereas a building CPA may also help, a professional in-house controller will assist develop and strengthen internal processes and controls. A robust controller can even assist put together internal financial statements which can be within the desired format and which can be correct and development again to your fiscal-year-end CPA evaluation.
• Improve frequency of economic 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 steadiness sheet, earnings assertion, getting old of receivables and work-in-progress (WIP) statements.
• Receive (or improve) a financial institution line of credit score.Building is an unpredictable enterprise that carries substantial threat of unanticipated cost delays. General money move administration paired with entry to capital is essential for each 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 power to reap the benefits of reductions from materials suppliers.
• Retain income within the firm.Sureties wish to see an organization organically rising its steadiness sheet. They analyze developments and search for regular earnings being retained over a number of years. It’s vital to steadiness your tax planning with leaving capital within the enterprise, which is able to improve your working capital and net-worth positions — in the end strengthening your steadiness sheet. As your organization’s retained earnings and internet value improve, you’ll be able to anticipate your bonding capability to develop together with it. Whereas retained earnings are vital, it’s typically mentioned that “money is king” — as sureties are additionally in search of liquidity and unleveraged capital once they do monetary analyses.

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

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