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What is a Surety Bond?
Just a quick brush up on what a surety bond is and why Surety Bonds are more of a financial or credit tool that speaks to the financial strength of your company, as well as the experience in the industry and overall ability to complete a particular construction project. A bond is a third-party agreement, the bonding company is bound to the provisions in the contract making them, in essence, your silent partner. In order for them to become your partner, they will require you to sign an indemnity agreement, something an insurance policy doesn’t require. This is the way a Surety company protects themselves should there be a loss. The amount of information required for a surety bond depends greatly on the size of the job or program desired, the credit profile of the company and its owners.
Why is the right agent important?
Most Agents are very familiar with standard programs that are quick and easy. These programs have set rates and restrictions on how large the job can be. However, having an agent that is well versed in the unique niche that is Surety Bonds can help you find a program more tailored to your needs. As a company grows moving away from a quick program can provide larger single and aggregate limits, as well as rates that reflect the strength of your company. For those contractors that have had a difficult time obtaining bonding in the past. The right agent will be invaluable knowing where to get you started and know when to move you to another company as your company becomes more appealing to
Keeping your best interest in mind, a bonding agent needs to be as responsive as you are on your job site. Keep in mind the right agent in only as good as the information provided to them by you and your accountant. If you are willing to provide information and listen to them, they can help you secure a bond program for your company for now and the future.
What role does an Accountant play in securing surety bonds?
Understanding how to structure a statement so that the Surety company sees your company’s assets in the best light is crucial. Oftentimes this is the most painful part of the bonding process as surety companies need to see profits. Profits to many accountants, and let’s face it all of us, mean more taxes. A bond
The only other member of this team that we haven’t discussed is you the contractor. Your knowledge and expertise of the projects you are looking at. No one likes surprises in the middle of a job, including surety companies.
With the right team in place pursuing bonded work can become less intimidating. It takes a little planning. That is why, if you talk to your team working together now will help you be prepared for whatever bids may be coming up. Get your team in place and grow your business.