Thank you for your interest in obtaining bonds through Assurance Ltd.. To place a submission the following items are needed:
- Key Employee Resumes
- Last Three Year-End business financial statements
- Buy Sell Agreement
- Bank Verification Letter
- Contractors Questionnaire
- Work-in-Progress Report
- Questionnaire & Financial Statement for any related entities
- Personal Financial Statements on all owners
The FIRST BOND - QUALIFICATION PROCESS outlines the process and details some additional information that may be required. In addition, the SURETY FINANCIAL ANALYSIS outlines the common financial rates and performance measures used by the Surety Underwriters to assess your financial strength. The following Services are available to you:
- Maximizing your bond capacity by proper presentation of your information on a continuing basis to the Surety which best fits your particular needs.
- Years of Surety underwriting and agency experience are provided for counseling on financial statements, credit history, and experience for the most advantageous presentation.
- Maintaining the quality of your bond file in regard to suggestions concerning financial or operational changes that could have a negative impact on your bonding.
- Assist you in handling any disputes on bonded projects.
- Assist you in review of your Sub or Prime contracts as applicable to your operations.
- An Agency Surety Underwriter rather than a clerical employee or an insurance agent will review your bond request.
- Delivery of Bonds to your office.
- Assistance with business perpetuation, continuity and Key-Man life agreement.
In today's highly competitive construction industry, more and more contractors are required to provide Surety Bonds to guarantee their performance on construction projects. This is true of both general contractors and subcontractors, as more owners and lenders require the protection provided by Surety Bonds. More and more general contractors and their Sureties require the same protection from their subs. Generally there are three types of Bonds you may encounter:
- Bid Bond - Guarantees that the bidder will actually enter the contract at the price bid and provide the required performance and payment Bonds.
- Performance Bond - Protects the owner from financial loss caused by failure of the contractor to build the project in accordance with the terms and conditions of the contract.
- Payment Bond - Guarantees that the contractor will pay all of the labor and material bills associated with the project.
How, then, do you go about qualifying for construction Surety Bonds? Your first step is to engage the services of a professional Surety Bond agent. He or she will guide you through the qualification process and help you present your case to Surety Bond Underwriters. They will also select a Surety company that is a good match for the personality and needs of your company. The Professional agent knows the Surety marketplace and the type of information needed to do a thorough evaluation of your company. Let's take a look at the process and the information you will need to provide to your agent.
- Organization Chart showing key employees and areas of responsibility.
- Detailed resumes of key people, including yourself.
- A business plan outlining the type of work you do, how you obtain your jobs, geographic area of operation, growth objectives, profit objectives, etc.
- Detailed information on five of your largest completed projects including the name and address of the owner, date completed, and gross profit earned.
- A continuity plan outlining how the business will continue in the event of an untimely death or disablement of a key individual or owner.
- Cost record information is extremely important in that without a good cost recording and bookkeeping system, a contractor does not know where he stands financially. Because of the risks inherent in the construction business, it behooves every contractor, large or small, to have cost and bookkeeping systems adequate to account for the financial status of his jobs. Without these systems, the contractor is not really in control and is subject to failure because of the inability to spot and rectify problems before they become too severe to correct.
- Trade references of subcontractors and suppliers listing name, address and telephone number of person to contact.
- A bank line of credit should be established and a copy provided. In this regard, it is important to point out that sureties are generally looking for an unsecured line of credit that can be used for working capital. Equipment financing is not necessarily what a Surety is seeking and financing that is based on an assignment of accounts receivable will not generally be looked upon favorably by a Surety. Receivable financing tends to pit the surety against the bank in a default situation because of what many on both sides consider to be legal ambiguities created by the Uniform Commercial Code. Your agent can be helpful in referring you to bankers interested in working with contractors.
- FInancial statements are vital to any credit-granting entity and particularly sureties. The balance sheet shows where a contractor stands financially and the profit and loss statement how this was achieved. The additional information in the form of various schedules, which are generally included, is helpful, indeed essential, to a proper interpretation and analysis of what is contained in the balance sheet and the profit and loss statement.
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