Transitioning from FastBonds to a Standard Bond Program

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

Particularly now, at the forefront of the post-pandemic building growth, your company’s contractor purchasers may have to extend their bonding capability to tackle extra and bigger tasks. Right here’s recommendation you’ll be able to share with them now to assist them prepare.

Many contractors that traditionally have wanted solely small and rare contract bonds have make the most of abbreviated underwriting packages, equivalent to Previous Republic Surety Firm’s FastBond program. The underwriting of such packages relies largely on the credit score scores of the applicant and house owners, and requires a lot much less info than is required to qualify below a regular bond program for bigger contracts. Listed here are some essential explanation why a contractor would wish to transition from a FastBond sort program to plain contract bond program — and the way to get that began.

Why would a contractor wish to improve their bonding capability?

• The price of the bond itself. FastBond packages are designed for a contractor that has occasional bond wants, and FastBonds are usually charged increased charges. Previous Republic Surety writes FastBonds as much as $1.5 million combination, typically at a $30/thousand charge. (As of the date of this text). Customary program charges are sometimes considerably much less, enabling the contractor to tender extra aggressive bids and probably earn higher margins on their work.
• The contractor desires to develop. Any contractor wishing to develop and tackle bigger tasks of longer length might want to convert to a regular bond program.

How will you transition from a FastBond program to a regular program?

Customary bond packages require extra subtle monetary info and value programs. A contractor can improve their bonding capability with a regular bond program by following these key steps:

1. Type a partnership together with your key monetary advisors. These embody an expert surety agent, a construction-oriented CPA, a financial institution that understands building lending and, after all, your surety underwriter.
2. Increase the standard of your monetary assertion presentation. CPA-prepared financials add credibility to the data you present. A CPA, ideally a construction-oriented CPA, will perceive the significance of fantastic inner value programs and might present the percentage-of-completion format most well-liked by sureties. CPAs will help you in presenting your monetary profile in the very best gentle. Cash saved by changing to a regular surety program will greater than pay for the addition {of professional} CPA providers.
3. Develop working capital and company web price. Make the dedication to construct up your steadiness sheet to help your required program by forgoing giant bonuses or pointless gear purchases. As soon as the steadiness sheet helps your program, surplus capital will be withdrawn as desired. This can present 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. Wonderful programs that observe job prices, handle the gathering of receivables, present for the immediate fee of payments when due, decrease surplus stock, and improve worker efficiency are all essential to the success of your organization. The next greatest practices will contribute to improved bottom-line profitability:
   • Unannounced job website inspections.
   • The usage of authorized contract types.
   • Correct documentation of change orders.
   • Proof of insurance coverage for all subcontractors.
   • Safety of belongings equivalent to gear and supplies.
   • Written security insurance policies to attenuate 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’ll be able to present the surety relating to the job you wish to bid, the extra assured the surety will probably be in offering the bond. Your willingness to satisfy underwriting necessities will vastly enhance your probability of acquiring additional surety help.

Previous Republic Surety prides itself on taking a consultative strategy with contractors who’re keen to observe the correct steps to extend their bonding capability. We offers you the recommendation it’s essential to take your bonding program to the subsequent stage. Contact your bond producer for extra info, or contact us and we will join you with one of the best bond producers within the enterprise.