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

This put up is a part of a collection sponsored by Outdated Republic Surety.

In case you have development purchasers who’re in progress mode and wish to tackle larger tasks, right here’s assist you possibly can share for rising their surety capability — notably 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 succeed in these targets? Perhaps you’d wish to bid on bigger tasks, or perhaps a longtime buyer needs to rent you for a a lot bigger mission.

Whereas a regular surety program will not be “one measurement 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:

• Kind 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.
• Enhance the standard of your monetary statements.Usually, taking your small business 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 inside controls in addition to crafting the mandatory monetary presentation required for maximizing bonding capability.
• Strengthen inside controls and your means to trace cost-to-complete backlog.Customary bond packages require extra refined value programs and monetary data. Whereas a development CPA also can help, a certified in-house controller will assist develop and strengthen inside processes and controls. A robust controller can 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 assessment.
• Enhance frequency of monetary statements. Outdoors 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 steadiness sheet, revenue assertion, getting older of receivables and work-in-progress (WIP) statements.
• Acquire (or improve) a financial institution line of credit score.Building is an unpredictable enterprise that carries substantial danger of unanticipated fee delays. Total money circulate administration paired with entry to capital is essential for day by day operations and survival of contractors. Some great benefits of a financial institution line embrace offering capital when a receivable is delayed and supplying 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 steadiness sheet. They analyze tendencies 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 is able to improve your working capital and net-worth positions — finally 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 typically stated that “money is king” — as sureties are additionally on the lookout for liquidity and unleveraged capital once 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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