Improve Your Contractor Purchasers’ FastBond to a Normal Bond Program

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

Your contractor purchasers as we speak have extra alternatives to work on higher-value tasks in each the private and non-private sectors. In accordance with an business outlook report by the Associated General Contractors of America, in 2024, contractors anticipate demand for development tasks in 14 out of the 17 development classes surveyed to extend in 2024. A few of the sectors with the most important anticipated progress embrace sewer and water, freeway and bridge, federal tasks, energy tasks and healthcare amenities.

This is a perfect time for you and your contractor purchasers to debate actions and methods that may assist them qualify for elevated bonding capability.

Many smaller or newer-in-business contractors acquire bonds on smaller sized tasks by means of abbreviated underwriting packages corresponding to Previous Republic Surety Firm’s FastBond program to get the wanted bonds for these contracts. FastBond streamlines the underwriting course of, is primarily credit-based, and doesn’t require the extent of economic and different underwriting data wanted to qualify for the standard bond program for bigger contracts.

Causes to improve a contractor’s bonding capability

Let’s have a look at why your contractor purchasers ought to take into account shifting from a FastBond-type program to a typical contract bond program and the way they will accomplish that.

• The contractor desires to develop and enhance income Changing to a typical bond program opens up alternatives for bigger and extra numerous contracts. Competitors is proscribed on many bigger contracts, serving to to lift the opportunity of elevated income.
• The price of the bond itself. FastBond packages are designed for a contractor that has occasional bond wants, and FastBonds are usually charged greater charges. Previous Republic Surety writes FastBonds that may go as excessive as $2 million mixture, typically at a $20 to $30/thousand price. Normal program charges are decrease, enabling the contractor to tender extra aggressive bids and probably earn higher margins on their work.

5 steps to transition from a FastBond program to a typical program

Normal bond packages require extra subtle monetary data and price methods. Contractors can enhance their bonding capability with a typical bond program by following these 5 steps:

1. Kind a partnership along with your key monetary advisors. These embrace knowledgeable surety agent, a construction-oriented CPA, a financial institution that understands development lending and, after all, your surety underwriter.
2. Enhance the standard of your monetary assertion presentation. CPA-prepared financials add credibility to the data you present. A CPA, ideally a construction-oriented CPA, understands the significance of sturdy inside price methods and may present the percentage-of-completion format most popular by sureties. CPAs will help you in presenting your monetary profile in the absolute best gentle. Further income earned and cash saved by changing to a typical surety program ought to greater than pay for the extra prices {of professional} CPA companies.
3. Develop working capital and company web value. Make the dedication to construct up your stability sheet to assist your required program by forgoing massive bonuses or pointless tools purchases. As soon as the stability sheet helps your program, surplus capital will be withdrawn as desired. This exhibits that you’re keen to do what it takes now to make your organization profitable in the long run.
4. Present proof of inside controls. Sturdy methods that observe job prices, handle the gathering of receivables, present for the immediate fee of payments when due, decrease surplus stock, and improve worker efficiency are all essential to the success of your organization. The next finest practices will contribute to improved bottom-line profitability:

• Unannounced job website inspections
• The usage of authorised contract varieties
• Correct documentation of change orders
• Proof of insurance coverage for all subcontractors
• Safety of property corresponding to tools and supplies
• Written security insurance policies to reduce job website hazards
• Incentives that reward workers for bottom-line revenue

5. Present details about the job to be carried out. The extra detailed data you may present the surety relating to the job you wish to bid and the way your expertise and capabilities qualify you to efficiently carry out it, the extra assured the surety can be in offering the bond. Moreover, your willingness to satisfy underwriting necessities will tremendously enhance your probability of acquiring elevated surety assist.

Previous Republic Surety Firm prides itself on taking a consultative strategy with contractors which might be keen to observe the wanted steps to extend their bonding capability. We will give you the recommendation you have to take your bonding program to the following stage. Contact your bond agent for extra data, or contact us so we are able to join you with the perfect bond producers within the enterprise.

Subjects
Contractors