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This submit is a part of a sequence sponsored by Outdated Republic Surety.

When you’ve got building shoppers who’re in progress mode and wish to tackle larger tasks, 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 further surety capability to achieve these targets? Possibly you’d prefer to bid on bigger tasks, or perhaps a longtime buyer needs to rent you for a a lot bigger challenge.

Whereas a regular surety program just isn’t “one dimension matches all” for each contractor, there are essential steps you possibly can take that will help you graduate from a credit-based fast bond program to a regular, 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, after all, your surety underwriter.
• Improve the standard of your monetary statements.Typically, taking your online business to the following stage requires hiring a construction-oriented CPA to organize a year-end assessment 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 capacity to trace cost-to-complete backlog.Commonplace bond applications require extra subtle price programs and monetary data. Whereas a building CPA may also help, a certified in-house controller will assist develop and strengthen inside processes and controls. A robust controller may even assist put together inside 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. Exterior of the fiscal-year-end CPA assessment and annual private monetary assertion, additionally, you will want to offer internally ready monetary assertion updates on a quarterly foundation — together with stability sheet, earnings assertion, growing older of receivables and work-in-progress (WIP) statements.
• Acquire (or enhance) a financial institution line of credit score.Building is an unpredictable enterprise that carries substantial threat of unanticipated fee delays. Total money move administration paired with entry to capital is vital 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 flexibility to reap the benefits of reductions from materials suppliers.
• Retain income within the firm.Sureties prefer to see an organization organically rising its stability sheet. They analyze developments and search for regular earnings 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 — in the end strengthening your stability sheet. As your organization’s retained earnings and internet value enhance, 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 searching for liquidity and unleveraged capital after they do monetary analyses.

Maintaining 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