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

This publish is a part of a sequence sponsored by Outdated Republic Surety.

You probably have development shoppers who’re in development mode and wish to tackle greater initiatives, right here’s assist you may 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 development objectives? Does your organization want further surety capability to succeed in these objectives? Possibly you’d wish to bid on bigger initiatives, or possibly a longtime buyer desires to rent you for a a lot bigger undertaking.

Whereas a regular surety program just isn’t “one measurement suits all” for each contractor, there are essential steps you may take that can assist 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, an expert surety agent and, in fact, your surety underwriter.
• Improve the standard of your monetary statements.Typically, taking your small business to the following degree requires hiring a construction-oriented CPA to arrange a year-end overview and high-quality monetary assertion. A development CPA will help with stronger inner controls in addition to crafting the mandatory monetary presentation required for maximizing bonding capability.
• Strengthen inner controls and your capacity to trace cost-to-complete backlog.Customary bond applications require extra refined value programs and monetary info. Whereas a development CPA may help, a certified in-house controller will assist develop and strengthen inner processes and controls. A powerful controller will even assist put together inner monetary statements which are within the desired format and which are correct and pattern again to your fiscal-year-end CPA overview.
• Improve frequency of monetary statements. Outdoors of the fiscal-year-end CPA overview and annual private monetary assertion, additionally, you will want to offer internally ready monetary assertion updates on a quarterly foundation — together with steadiness sheet, earnings assertion, getting older of receivables and work-in-progress (WIP) statements.
• Acquire (or improve) a financial institution line of credit score.Development is an unpredictable enterprise that carries substantial threat of unanticipated cost delays. General 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 supplying you with the flexibility 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 tendencies and search for regular earnings 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 may 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.

Protecting 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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