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

This submit is a part of a collection sponsored by Outdated Republic Surety.

When you’ve got development purchasers who’re in development mode and wish to tackle greater 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 normal surety program.

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

Whereas a normal surety program shouldn’t be “one measurement suits 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 normal, bigger surety program:

• Kind 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.Typically, taking what you are promoting to the subsequent stage requires hiring a construction-oriented CPA to organize a year-end assessment and high-quality monetary assertion. A development CPA will help with stronger inner controls in addition to crafting the mandatory monetary presentation required for maximizing bonding capability.
• Strengthen inner controls and your means to trace cost-to-complete backlog.Normal bond applications require extra subtle price methods and monetary data. Whereas a development CPA may also help, a professional in-house controller will assist develop and strengthen inner processes and controls. A robust controller can even assist put together inner monetary statements which might be within the desired format and which might be correct and pattern again to your fiscal-year-end CPA assessment.
• Improve frequency of economic statements. Outdoors of the fiscal-year-end CPA assessment and annual private monetary assertion, additionally, you will want to supply internally ready monetary assertion updates on a quarterly foundation — together with steadiness sheet, revenue assertion, getting older of receivables and work-in-progress (WIP) statements.
• Get hold of (or improve) a financial institution line of credit score.Building is an unpredictable enterprise that carries substantial danger of unanticipated cost delays. Total money stream administration paired with entry to capital is essential for every day operations and survival of contractors. The benefits of a financial institution line embody offering capital when a receivable is delayed and supplying you with the flexibility to make the most of reductions from materials suppliers.
• Retain earnings within the firm.Sureties prefer to see an organization organically rising its steadiness sheet. They analyze developments 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 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 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 on the lookout for liquidity and unleveraged capital once they do monetary analyses.

Holding 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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