Improve Your Contractor Purchasers’ FastBond to a Normal Bond Program

This publish is a part of a collection sponsored by Outdated Republic Surety.

Your contractor purchasers in the present day have extra alternatives to work on higher-value tasks in each the private and non-private sectors. In accordance with an trade outlook report by the Related Basic Contractors of America, in 2024, contractors count on demand for building tasks in 14 out of the 17 building classes surveyed to extend in 2024. A few of the sectors with the most important 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 purchasers to debate actions and methods that may assist them qualify for elevated bonding capability.

Many smaller or newer-in-business contractors get hold of bonds on smaller sized tasks via abbreviated underwriting applications reminiscent of Outdated Republic Surety Firm’s FastBond program to get the wanted bonds for these contracts.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 economic and different underwriting data 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 think about 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 improve income 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 income.
• The price of the bond itself. FastBond applications are designed for a contractor that has occasional bond wants, and FastBonds are sometimes charged greater charges. Outdated Republic Surety writes FastBonds that may go as excessive as $2 million combination, usually at a $20 to $30/thousand charge. Normal program charges are decrease, enabling the contractor to tender extra aggressive bids and probably earn higher margins on their work.

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

Normal bond applications require extra refined monetary data and value methods. Contractors can improve their bonding capability with a regular bond program by following these 5 steps:

1. Kind 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. 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 robust inside price methods 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. 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 price. Make the dedication to construct up your stability sheet to assist your required program by forgoing massive bonuses or pointless tools purchases. As soon as the stability sheet helps your program, surplus capital may be withdrawn as desired. This exhibits that you’re keen to do what it takes now to make your organization profitable in the long run.
4. Present proof of inside controls. Sturdy methods that observe job prices, handle the gathering of receivables, present for the immediate cost of payments when due, reduce surplus stock, and improve worker efficiency are all necessary to the success of your organization. The next greatest practices will contribute to improved bottom-line profitability:

• Unannounced job website inspections
• Using accredited contract kinds
• Correct documentation of change orders
• Proof of insurance coverage for all subcontractors
• Safety of belongings reminiscent of tools and supplies
• Written security insurance policies to attenuate job website hazards
• Incentives that reward workers for bottom-line revenue

5. Present details about the job to be carried out. The extra detailed data you possibly can 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 likely be in offering the bond. Moreover, your willingness to satisfy underwriting necessities will vastly enhance your probability of acquiring elevated surety assist.

Outdated Republic Surety Firm prides itself on taking a consultative strategy with contractors which might be keen to observe the wanted steps to extend their bonding capability. We are able to give you the recommendation you could take your bonding program to the subsequent stage. Contact your bond agent for extra data, or contact us so we are able to join you with the most effective bond producers within the enterprise.

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