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

This put up is a part of a collection sponsored by Previous Republic Surety.

When you’ve got development shoppers who’re in progress mode and wish to tackle greater tasks, right here’s assist you may share for growing their surety capability — notably 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 achieve these targets? Possibly you’d wish to bid on bigger tasks, or perhaps a longtime buyer needs to rent you for a a lot bigger undertaking.

Whereas a typical surety program will not be “one dimension matches all” for each contractor, there are essential steps you may 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, an expert surety agent and, after all, your surety underwriter.
• Improve the standard of your monetary statements.Usually, taking what you are promoting to the subsequent stage requires hiring a construction-oriented CPA to organize a year-end evaluation and high-quality monetary assertion. A development CPA will help with stronger inside controls in addition to crafting the mandatory monetary presentation required for maximizing bonding capability.
• Strengthen inside controls and your capability to trace cost-to-complete backlog.Customary bond packages require extra refined value methods and monetary data. Whereas a development CPA may also help, a certified in-house controller will assist develop and strengthen inside processes and controls. A powerful controller will even assist put together inside monetary statements which can be within the desired format and which can be correct and development again to your fiscal-year-end CPA evaluation.
• Improve frequency of economic statements. Exterior of the fiscal-year-end CPA evaluation and annual private monetary assertion, additionally, you will want to offer internally ready monetary assertion updates on a quarterly foundation — together with steadiness sheet, revenue assertion, growing old of receivables and work-in-progress (WIP) statements.
• Receive (or enhance) a financial institution line of credit score.Development is an unpredictable enterprise that carries substantial threat of unanticipated fee delays. General money circulation administration paired with entry to capital is essential for each day operations and survival of contractors. The benefits of a financial institution line embrace offering capital when a receivable is delayed and supplying you with the power to make the most of reductions from materials suppliers.
• Retain income within the firm.Sureties wish 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 enhance your working capital and net-worth positions — finally strengthening your steadiness sheet. As your organization’s retained earnings and web price enhance, you may 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 after they do monetary analyses.

Protecting 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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