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 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 — notably if they should transition from a credit-based fast bond program to a normal surety program.

Does your organization have progress objectives? Does your organization want further surety capability to achieve these objectives? Possibly you’d wish to bid on bigger initiatives, or possibly a longtime buyer needs to rent you for a a lot bigger undertaking.

Whereas a normal surety program shouldn’t be “one measurement suits all” for each contractor, there are essential steps you’ll be able to take that can assist you graduate from a credit-based fast bond program to a normal, 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.
• Enhance the standard of your monetary statements.Typically, taking your enterprise to the following stage requires hiring a construction-oriented CPA to arrange a year-end overview 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 potential to trace cost-to-complete backlog.Normal bond packages require extra refined price programs and monetary info. Whereas a development CPA may 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 overview.
• Enhance frequency of monetary statements. Exterior 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 stability sheet, revenue assertion, ageing of receivables and work-in-progress (WIP) statements.
• Receive (or improve) 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 every day operations and survival of contractors. Some great benefits of a financial institution line embrace 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 wish to see an organization organically rising its stability sheet. They analyze traits 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 improve your working capital and net-worth positions — in the end strengthening your stability sheet. As your organization’s retained earnings and internet value improve, you’ll be able to count on your bonding capability to develop together with it. Whereas retained earnings are vital, it’s typically mentioned that “money is king” — as sureties are additionally searching for liquidity and unleveraged capital once 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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