As all commerical contractors know it’s a necessity to obtain surety bonding. We are seeing more and more jobs requiring bonding today. Public entities require bid and performance bonds for their projects and General Contractors will require surety bonds from their subcontractors. Private companies are even starting to require bonds to protect against default. Here are some tips to establish and maintain a surety line.
1.) Always do some homework when you select a bond broker and surety company. Make sure the broker specializes in contract surety bonding and is familiar with construction contracts. Working with a bond broker who has direct appointments with the surety will help speed up the underwriting process. All surety companies should be listed with the US Department of Treasury to write surety bonds for the federal government projects and have an A-rating or higher from A.M. Best or an equivalent rating from a respected rating organization like Dun & Bradstreet or Fitch Ratings.
2.) You will want to build a strong relationship with your broker as they will be your biggest ally and advocate. Always be willing to share as much information with broker to build this relationship. Let them know if you see any potential issues on the job, changes within the company like expansion plans into new markets or larger scale projects. By doing the above it should allow your broker to work with the surety to increase your bonding capacity for future work.
3.) Work hard to maintain a strong business by keeping it as profitable as possible. Keys to stay profitable are to manage cash flow, completing projects in a timely manor and within budgets.
4.) Prior to biding a project make sure you get prequalified. Always know your current bonding line and work within this capacity. The surety will want current a current financial statement for the company and sometimes personal financial statements. Be ready to supply the surety with completed jobs, current jobs that are open, line of credit, references and resumes of all key personnel.