Improve Your Contractor Shoppers’ FastBond to a Normal Bond Program

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

Your contractor purchasers right now have extra alternatives to work on higher-value tasks in each the private and non-private sectors. Based on an trade outlook report by the Related Normal Contractors of America, in 2024, contractors anticipate demand for development tasks in 14 out of the 17 development classes surveyed to extend in 2024. Among the sectors with the most important anticipated progress embrace sewer and water, freeway and bridge, federal tasks, energy tasks and healthcare services.

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

Many smaller or newer-in-business contractors receive bonds on smaller sized tasks by means of abbreviated underwriting packages equivalent to 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 purchasers ought to take into account transferring from a FastBond-type program to a regular contract bond program and the way they’ll achieve this.

• The contractor desires to develop and enhance income Changing to a regular bond program opens up alternatives for bigger and extra numerous contracts. Competitors is proscribed on many bigger contracts, serving to to lift the potential of elevated income.
• 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 that may go as excessive as $2 million mixture, typically at a $20 to $30/thousand charge. Normal 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

Normal 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. Kind a partnership along with your key monetary advisors. These embrace an expert surety agent, a construction-oriented CPA, a financial institution that understands development lending and, after all, your surety underwriter.
2. Improve 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 popular by sureties. CPAs will help you in presenting your monetary profile in the very best mild. Further income earned and cash saved by changing to a regular surety program ought to greater than pay for the extra prices {of professional} CPA providers.
3. Develop working capital and company internet value. Make the dedication to construct up your steadiness sheet to assist your required program by forgoing massive bonuses or pointless gear purchases. As soon as the steadiness sheet helps your program, surplus capital may be withdrawn as desired. This exhibits that you’re prepared 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 fee of payments when due, decrease surplus stock, and improve worker efficiency are all vital to the success of your organization. The next greatest practices will contribute to improved bottom-line profitability:

• Unannounced job web site inspections
• Using authorised 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 web site hazards
• Incentives that reward staff for bottom-line revenue

5. Present details about the job to be carried out. The extra detailed info you may present the surety relating to 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 probably be in offering the bond. Moreover, your willingness to satisfy underwriting necessities will drastically enhance your likelihood of acquiring elevated surety assist.

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

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Contractors