Improve Your Contractor Shoppers’ FastBond to a Customary Bond Program

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

Your contractor shoppers at this time have extra alternatives to work on higher-value tasks in each the private and non-private sectors. In accordance with an business outlook report by the Related Common Contractors of America, in 2024, contractors anticipate demand for development tasks in 14 out of the 17 development classes surveyed to extend in 2024. A number of the sectors with the biggest anticipated development embody sewer and water, freeway and bridge, federal tasks, energy tasks and healthcare services.

This is a perfect time for you and your contractor shoppers to debate actions and techniques that may assist them qualify for elevated bonding capability.

Many smaller or newer-in-business contractors acquire bonds on smaller sized tasks by way of abbreviated underwriting packages resembling Previous Republic Surety Firm’s FastBond program to get the wanted bonds for these contracts. FastBond streamlines the underwriting course of, is primarily credit-based, and doesn’t require the extent of monetary and different underwriting info wanted to qualify for the standard bond program for bigger contracts.

Causes to improve a contractor’s bonding capability

Let’s have a look at why your contractor shoppers ought to take into account shifting from a FastBond-type program to a regular contract bond program and the way they’ll accomplish that.

• The contractor desires to develop and enhance earnings Changing to a regular bond program opens up alternatives for bigger and extra numerous contracts. Competitors is restricted on many bigger contracts, serving to to boost the potential for elevated earnings.
• The price of the bond itself. FastBond packages are designed for a contractor that has occasional bond wants, and FastBonds are usually charged larger charges. Previous Republic Surety writes FastBonds that may go as excessive as $2 million mixture, typically at a $20 to $30/thousand charge. Customary program charges are decrease, enabling the contractor to tender extra aggressive bids and presumably earn higher margins on their work.

5 steps to transition from a FastBond program to a regular program

Customary bond packages require extra refined monetary info and value methods. Contractors can enhance their bonding capability with a regular bond program by following these 5 steps:

1. Type a partnership along with your key monetary advisors. These embody an expert surety agent, a construction-oriented CPA, a financial institution that understands development lending and, after all, your surety underwriter.
2. Enhance the standard of your monetary assertion presentation. CPA-prepared financials add credibility to the knowledge you present. A CPA, ideally a construction-oriented CPA, understands the significance of sturdy inner price methods and may present the percentage-of-completion format most well-liked by sureties. CPAs will help you in presenting your monetary profile in the very best mild. Further earnings earned and cash saved by changing to a regular surety program ought to greater than pay for the extra prices {of professional} CPA companies.
3. Develop working capital and company web price. Make the dedication to construct up your steadiness sheet to assist your required program by forgoing giant bonuses or pointless tools purchases. As soon as the steadiness sheet helps your program, surplus capital may be withdrawn as desired. This reveals that you’re keen to do what it takes now to make your organization profitable in the long run.
4. Present proof of inner controls. Sturdy methods that monitor job prices, handle the gathering of receivables, present for the immediate cost of payments when due, decrease surplus stock, and improve worker efficiency are all necessary to the success of your organization. The next finest practices will contribute to improved bottom-line profitability:

• Unannounced job website inspections
• Using accredited contract types
• Correct documentation of change orders
• Proof of insurance coverage for all subcontractors
• Safety of property resembling tools and supplies
• Written security insurance policies to reduce job website hazards
• Incentives that reward staff for bottom-line revenue

5. Present details about the job to be carried out. The extra detailed info you possibly can present the surety concerning the job you need to bid and the way your expertise and capabilities qualify you to efficiently carry out it, the extra assured the surety will likely be in offering the bond. Moreover, your willingness to satisfy underwriting necessities will enormously enhance your likelihood of acquiring elevated surety assist.

Previous Republic Surety Firm prides itself on taking a consultative strategy with contractors which can be keen to comply with the wanted steps to extend their bonding capability. We will give you the recommendation it’s good to take your bonding program to the following degree. Contact your bond agent for extra info, or contact us so we are able to join you with one of the best bond producers within the enterprise.

Subjects
Contractors