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This submit is a part of a sequence sponsored by Outdated Republic Surety.

In case you have building shoppers who’re in progress 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 regular surety program.

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

Whereas a regular surety program is just not “one dimension matches all” for each contractor, there are crucial steps you can take that will help 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.
• Enhance the standard of your monetary statements.Usually, taking your corporation to the subsequent 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 required monetary presentation required for maximizing bonding capability.
• Strengthen inside controls and your means to trace cost-to-complete backlog.Normal bond applications require extra subtle price techniques 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 powerful controller can even 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 evaluation.
• Enhance 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.
• Acquire (or improve) a financial institution line of credit score.Development is an unpredictable enterprise that carries substantial threat of unanticipated cost delays. General money movement administration paired with entry to capital is vital 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 power to benefit from reductions from materials suppliers.
• Retain income within the firm.Sureties prefer to see an organization organically rising its steadiness sheet. They analyze tendencies 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 price improve, you possibly can count on your bonding capability to develop together with it. Whereas retained earnings are vital, it’s typically stated that “money is king” — as sureties are additionally searching for 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.

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