How to Get Your First Bond, Part 2

This put up is a part of a collection sponsored by Outdated Republic Surety.

This two-part article is addressed to building contractors who’re making use of for his or her first commonplace bond. In the primary half, Mueller defined the significance of an impartial surety agent ― that’s, you ― within the bonding course of, and he outlined the monetary paperwork a contractor might want to provide their surety firm.

On this sequel, Mueller additional explains the surety course of and lists the continuing paperwork a contractor might want to keep for his or her surety. Share this text along with your contractor purchasers. It’s full of fine info for them ― and for you as you construct your surety guide of enterprise.

In my first weblog on this matter, we talked concerning the significance of knowledgeable surety agent and learn how to discover one, and the monetary info you will want to arrange. Right here’s extra you’ll wish to know:

Begin the method early

To make sure well timed approval, start the submission course of nicely earlier than the date you want the bond. A great rule of thumb is to permit 30 days for the method to be accomplished; if you can begin earlier, a lot the higher. Permitting at the very least 30 days supplies the underwriter with enough time to evaluate the data supplied, ask follow-up questions and conduct a gathering with you and your agent.

When you’ve been authorized for a bid bond, efficiency and cost bonds could also be issued in case you are awarded the venture.

Just a few extra steps

Sureties don’t simply take a look at financials after they do their underwriting. They’re additionally desirous about your expertise and your organization’s capability to tackle the bonded work. They could wish to see the résumés of the highest individuals in your organization, together with venture managers and estimators. They’ll additionally take a look at the dimensions of the venture in comparison with earlier work, your present backlog and whether or not you’ve accomplished different initiatives on time.

Lastly, and positively not least, the surety firm might wish to meet with you and your administration crew. Surety is a enterprise primarily based on belief, and underwriters place loads of significance on character, one of many three C’s of surety underwriting (character, capital and capability). Since character can’t be judged by a monetary assertion, your surety will wish to get to know you and your organization.

A fast observe about CPAs

In Half 1, we discovered {that a} educated CPA may be invaluable throughout this course of. However not all CPAs are the identical. Some concentrate on producers, others concentrate on public entities, and a few concentrate on building. We extremely suggest a construction-focused CPA.

Building CPAs perceive the paperwork and monetary statements that your surety will want. They’re extremely expert within the technique of accounting that contractors want to make use of and can produce statements that comprise the schedules and notes that sureties and different building collectors search for.

For those who don’t have a building CPA, ask for a referral out of your agent or banker. Odds are they are going to know the perfect building CPAs in your space.

Ongoing documentation

After you’ve been authorized in your bond, you’ll want to supply ongoing info to your surety. This will likely embrace:

1. Quarterly internally ready monetary statements with WIP and ageing of accounts receivable
2. CPA-prepared fiscal year-end monetary assertions
3. Private monetary statements
4. Up to date financial institution line of credit score agreements after the road renews

As well as, most sureties will schedule an annual assembly after you’ve submitted your year-end monetary assertion. This assembly permits the underwriter to get suggestions from you on how the yr went and what the approaching yr has in retailer for you. Plus, it’s an opportunity for the underwriter to proceed to develop a rapport with you. This could pay dividends down the street if you wish to bid on a job that’s notably massive or uncommon.

Make your bonding course of simpler

Keep in mind, establishing surety credit score will go a lot smoother if you happen to take the time to be taught what’s required, work with a great agent and use a building CPA to arrange your financials.

In case you have any questions on something relating to surety, attain out to an Outdated Republic Surety department nearest you.

Learn Half 1 of Mueller’s weblog.