Maximizing your surety
bond credit potential

By Larry Michael
The Brehmer Agency

If you desire to increase your overall capacity to obtain higher levels of surety credit, you must establish and maintain a relationship of mutual trust, confidence and respect between yourself and your surety.

Here are a few tips outlining what "best of class" contractors do to maintain high levels of surety bond credit.

• Choose certified public accountants, attorneys, bankers, insurance and bonding agents who are recognized as contractor-oriented professionals servicing your industry. These people are your "financial/business" professionals.
  
  
• Develop a construction industry standard accounting system with work-in-process job costs tied to your general ledger on percentage of completion method.
  
  
• Do an annual business plan and review this with your financial professionals.
  
  
• Develop a corporate continuity plan and buy/sell agreement.
  
  
• Provide quarterly balance sheet, income statement and work-in-process reports to your financial professionals.
  
  
• Provide at least an annual bank letter of reference outlining your credit accommodations.
  
  
• Provide resumes and company background information and pre-qualification information annually.
  
  
• Anticipate large or unusual surety bond needs and communicate that to your surety well in advance.
  
  
• Understand and review financial ratios and surety financial analysis with your bonding company for each financial report.
  
  
• Provide or be prepared to provide personal guarantees to maximize your company’s credit potential.

Best of class contractors treat their financial professionals as an unpaid board of directors. They meet and discuss business plans and strategies at least annually, and more often if needed.

Ask your surety agent and bonding company for specifics as to what you can do to increase your surety capacity. Be direct and ask for direct and candid responses. This is not intended to be criticism or fault finding of your operations, but rather information that will allow you to make informed business decisions regarding your surety credit. While you might disagree with what the agent may suggest, you will know what makes them comfortable or uncomfortable.

Most sureties that enjoy a good, long-term relationship with a contractor respond favorably when asked to stretch credit into the unusual or out of the ordinary due to the excellent communications that have been established over the years. If your surety is not comfortable, you have the option to ask your bonding agent to explore the market for a more compatible surety. A knowledgeable, experienced and well-trained bonding agent can help you maximize your surety credit potential.

Phone 262-781-3714
Fax 262-781-6049
E-mail

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