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

This put up is a part of a sequence sponsored by Outdated Republic Surety.

When you have building shoppers who’re in development mode and wish to tackle larger tasks, 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 an ordinary surety program.

Does your organization have development objectives? Does your organization want further surety capability to achieve these objectives? Perhaps you’d wish to bid on bigger tasks, or possibly a longtime buyer needs to rent you for a a lot bigger undertaking.

Whereas an ordinary surety program just isn’t “one dimension matches 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 an ordinary, bigger surety program:

• Type a partnership with trusted monetary advisors.This features a construction-oriented CPA, a financial institution that understands building lending, an expert surety agent and, in fact, your surety underwriter.
• Enhance the standard of your monetary statements.Usually, taking your enterprise to the following stage requires hiring a construction-oriented CPA to organize a year-end evaluate and high-quality monetary assertion. A building 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 capacity to trace cost-to-complete backlog.Commonplace bond applications require extra refined price techniques and monetary data. Whereas a building CPA also can help, a certified in-house controller will assist develop and strengthen inner processes and controls. A powerful controller can even assist put together inner monetary statements which are within the desired format and which are correct and development again to your fiscal-year-end CPA evaluate.
• Enhance frequency of monetary statements. Exterior of the fiscal-year-end CPA evaluate and annual private monetary assertion, additionally, you will want to supply internally ready monetary assertion updates on a quarterly foundation — together with stability 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.Development is an unpredictable enterprise that carries substantial threat of unanticipated fee delays. Total money circulation administration paired with entry to capital is vital for each day operations and survival of contractors. The benefits of a financial institution line embody offering capital when a receivable is delayed and providing you with the flexibility to benefit from reductions from materials suppliers.
• Retain earnings within the firm.Sureties wish to see an organization organically rising its stability sheet. They analyze developments and search for regular revenue being retained over a number of years. It’s necessary to stability your tax planning with leaving capital within the enterprise, which can improve your working capital and net-worth positions — finally strengthening your stability sheet. As your organization’s retained earnings and web price improve, you possibly can anticipate your bonding capability to develop together with it. Whereas retained earnings are necessary, it’s typically stated that “money is king” — as sureties are additionally searching for liquidity and unleveraged capital after they do monetary analyses.

Conserving 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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