Help Your Contractor Client Transition from Quick Bonds to a Larger Surety Program

This publish is a part of a collection sponsored by Outdated Republic Surety.

You probably have development purchasers who’re in progress mode and need to tackle greater initiatives, right here’s assist you’ll be able to share for growing their surety capability — significantly if they should transition from a credit-based fast bond program to a typical surety program.

Does your organization have progress 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 typical surety program isn’t “one dimension suits all” for each contractor, there are essential steps you’ll be able to take that will help you graduate from a credit-based fast bond program to a typical, bigger surety program:

• Type a partnership with trusted monetary advisors.This features a construction-oriented CPA, a financial institution that understands development lending, knowledgeable surety agent and, after all, your surety underwriter.
• Improve the standard of your monetary statements.Usually, taking your online business to the subsequent stage requires hiring a construction-oriented CPA to organize a year-end evaluate and high-quality monetary assertion. A development 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.Commonplace bond packages require extra refined value methods and monetary data. Whereas a development CPA also can help, a professional in-house controller will assist develop and strengthen inside processes and controls. A powerful controller will even assist put together inside monetary statements which are within the desired format and which are correct and pattern again to your fiscal-year-end CPA evaluate.
• Improve 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 old of receivables and work-in-progress (WIP) statements.
• Get hold of (or enhance) a financial institution line of credit score.Building is an unpredictable enterprise that carries substantial threat of unanticipated fee delays. General money circulation administration paired with entry to capital is essential for every day operations and survival of contractors. Some great benefits of a financial institution line embody offering capital when a receivable is delayed and providing you with the power to make the most of reductions from materials suppliers.
• Retain earnings within the firm.Sureties prefer to see an organization organically rising its stability sheet. They analyze tendencies and search for regular revenue being retained over a number of years. It’s vital to stability your tax planning with leaving capital within the enterprise, which can enhance your working capital and net-worth positions — finally strengthening your stability sheet. As your organization’s retained earnings and web value enhance, you’ll be able to anticipate your bonding capability to develop together with it. Whereas retained earnings are vital, it’s usually mentioned 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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Contractors