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

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

If in case you have building purchasers who’re in progress mode and wish to tackle larger tasks, right here’s assist you’ll be able to share for growing 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 succeed in these targets? Possibly you’d wish to bid on bigger tasks, or possibly a longtime buyer needs to rent you for a a lot bigger venture.

Whereas a regular surety program is just not “one measurement suits all” for each contractor, there are essential steps you’ll be able to 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, knowledgeable surety agent and, in fact, your surety underwriter.
• Improve the standard of your monetary statements.Usually, taking what you are promoting to the following degree requires hiring a construction-oriented CPA to organize a year-end assessment and high-quality monetary assertion. A building CPA will help with stronger inner controls in addition to crafting the required monetary presentation required for maximizing bonding capability.
• Strengthen inner controls and your capability to trace cost-to-complete backlog.Commonplace bond applications require extra refined price programs and monetary data. Whereas a building CPA can even help, a professional in-house controller will assist develop and strengthen inner processes and controls. A powerful controller may also assist put together inner monetary statements which can be within the desired format and which can be correct and development again to your fiscal-year-end CPA assessment.
• Improve frequency of monetary statements. Exterior of the fiscal-year-end CPA assessment and annual private monetary assertion, additionally, you will want to supply internally ready monetary assertion updates on a quarterly foundation — together with steadiness sheet, earnings assertion, getting old of receivables and work-in-progress (WIP) statements.
• Receive (or improve) a financial institution line of credit score.Building is an unpredictable enterprise that carries substantial threat of unanticipated cost delays. General money circulation administration paired with entry to capital is vital for each 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 flexibility to reap the benefits of 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 earnings being retained over a number of years. It’s essential 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 web value improve, you’ll be able to count on your bonding capability to develop together with it. Whereas retained earnings are essential, it’s usually mentioned 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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