Upgrade FastBond for Contractor Customers to Standard Warranty Program

This post is part of a series sponsored by Old Republic Surety.

Today, contractor clients increasingly work on higher-value projects in both the public and private sectors. According to the industry outlook report, Related American general contractorscontractors expect demand to increase in 2024 for construction projects in 14 of the 17 construction categories surveyed. Sectors expected to see the greatest growth include sewer and water, highways and bridges, federal projects, power projects, and health care facilities. .

This is an ideal time to discuss actions and strategies that will help you and your contractor client qualify to bond.

Many small or start-up contractors obtain small project bonds through accelerated underwriting programs like Old Republic Surety Company. fast bond A program to obtain the deposit required for those contracts. FastBond streamlines the underwriting process and is primarily credit-based and does not require the range of financial and other underwriting information required to qualify for standard bond programs for large contracts.

Why improve contractor warranty capabilities?

Let’s take a look at why and how your contractor clients should consider moving from a FastBond-type program to a standard contract bond program.

• Contractors want to grow and increase profits Moving to a standard bond program opens up opportunities for larger and more diverse contracts. Many large contracts limit competition and increase the potential for increased profits.
• The cost of the bond itself. The FastBond program is designed for contractors who occasionally require a bond, and FastBond typically charges higher fees. Old Republic Surety typically writes fast bonds totaling up to $2 million at rates of $20 to $30 per $1,000. Standard program fees are lower, allowing contractors to bid more competitively and potentially earn a better profit on their work.

5 steps to move from FastBond program to standard program

Standard bond programs require more sophisticated financial information and cost systems. Contractors can increase their warranty capabilities using standard warranty programs by following these five steps.

1. Build partnerships with key financial advisors. These include professional sureties, construction-oriented CPAs, banks that understand construction financing, and of course, sureties.
2. Improve the quality of your financial statement presentation. Financial statements prepared by a CPA increase the reliability of the information they provide. A CPA, preferably a construction-oriented CPA, understands the importance of a strong internal costing system and can provide the form of percentage-of-completion method that the surety prefers. A CPA can help you present your financial profile in the best light possible. The additional benefits and money saved by switching to a standard warranty program should be more than enough to cover the additional cost of professional CPA services.
3. Expand working capital and corporate net worth. Avoid large bonuses and unnecessary equipment purchases and strive to build your balance sheet to support your desired programs. Once your balance sheet supports your program, you can withdraw excess capital as needed. This shows your willingness to do what it takes now to make the company successful in the long term.
4. Please provide evidence of internal controls. A robust system that tracks job costs, manages collections on accounts receivable, pays invoices quickly when they’re due, minimizes excess inventory, and improves employee performance are all key to a company’s success. It’s important. The following best practices will help improve your profitability.

• Unannounced on-site inspection
• Use of approved agreements
• Proper documentation of change requests
• Insurance cards for all subcontractors
• Protection of assets such as equipment and materials
• Written safety policy to minimize workplace hazards
• Incentives for employees to benefit their bottom line

5. Provides information about the job to run. The more detailed information you can provide the surety about the job you want to bid on and what your experience and abilities are to successfully complete the job, the more confident the surety will be. You will have to provide a security deposit. Additionally, your willingness to meet underwriting requirements significantly increases your chances of obtaining more warranty support.

Old Republic Surety Company prides itself on taking a consultative approach with contractors who are willing to take the necessary steps to increase their assurance capabilities. We provide the advice you need to take your bonding program to the next level. For more information, contact your bond agent or contact us to connect you with the best bond issuers in the industry.

Topics
contractor