How to Increase Your Surety Bond Capacity - Bonding Solutions

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How to Increase Your Surety Bond Capacity

Bonding capacity matters, even more than some people realize. You’ve probably wondered and looked for ways to increase your company’s surety bond capacity. But how? Bonding capacity can either hold your company back or make it move forward. Increasing one’s bonding capacity is a must in today’s growing world. It can make your business go from small to large projects – all in a timely manner. Bonding Solutions, a trusted partner who’s going to help grow your business, is here to give some tips on how to increase your surety bond capacity. Our team can help you take on larger projects that’ll make your company a staple in your specific industry. Learn how to increase your bond capacity and contact Bonding Solutions today to apply for your next bond, no matter the amount or type. 

What Is Bond Capacity?

Bond capacity is the maximum amount of credit a surety bond company provides to the client. The most important component to determining a client’s bond capacity is said client’s financial record. Contractors seeking to increase their bonding capacity should take an honest look at their financials and acknowledge areas for improvement. Providing the surety bond company with proper financial information will pinpoint to them that the client is going to be able to withstand any future problems in a timely manner. Meaning that the client’s business is reliable and trusted in the industry.

Be Reliable and Trusted

The surety bond industry is a business based on relationships. As a financial institution, communication and trust are crucial between the client and the surety agency, especially when increased bonding capacity is the end goal. When clients wish to increase their bond capacity both parties benefit. In order to increase surety bond capacity, the client needs to prove they are worthy and able to pay the possible losses. The trust that the surety company gives will be returned by the client.

What We Advise Our Clients To Do If They Want To Increase Surety Bond Capacity

Below is the list of items you, as a business owner, should invest your money in. These action items will help you grow your business substantially. Some of these may seem redundant to you, but they’re a clear indicator that you really mean business. Every successful business has most if not all of these elements covered.

Hiring Third-Party Accountants

Having a third-party person (or people) that can validate how your business is doing financially is important. In most cases where a job is over $500,000, it’s required. Surety bond companies look at who’s doing the financial records while combing through the statements they received from their client. An independent accountant, who’s going to validate all of your financial records, makes the job of a surety bond company much easier versus the possibility of a person who’s inside of your company and who might be more prone to “cooking” the financial books. Side note: hiring professional accountants can help you with your business. It’s not easy to navigate through every statement and invoice, and people that lack experience tend to get lost in the mix. Hiring a professional is a step in the right direction – just where your company is headed.

Hiring A Law Firm That Knows Your Industry

Lawyers, who are experts in their respected field, will make your life easier. Simple as that. They look out for your best interest at every corner. They stay on top of things, so you can stay concentrated on running your business as efficiently as possible. The business you’re in is a business full of contracts and necessary contractual obligations that must be fulfilled in order for a project to be deemed successful. The technicality of contractual obligations can be a pain to look at without a fresh set of expert eyes. Your lawyer will remind you of your rights and your obligations every step of the way. Hire a law firm that has a great reputation, even if they sometimes come with a hefty price tag.

Having A Great Relationship With The Bank Of Your Choice

While choosing a bank, and subsequently approaching them for a mutually healthy relationship, don’t just consider your bank as someone who’s going to secure you the finances for the business. Look at them as your partners. In most cases, their line of credit is what’s going to elevate your business into a different sphere. Finding the right bank that offers financial security with minimal fees is crucial for your business and increasing your bond capacity.

Necessary Factors That Surety Bond Companies Look At While Deciding On The Potential Increasement Of Bond Capacity

Below is a list of things that surety bond companies look at while reviewing your bond capacity. Fulfilling most of these is a statement on its own. But we want you to take a step further and fulfill all of them. Checking off each item in this list will show the surety bond agency that you indeed deserve a bond capacity increase.

Showing Great Organizational Skills

Your company needs to be structured in order to achieve maximum success. To increase the bonding capacity, you must have a set structure of the organization. Simply put, everything needs to run as smooth as butter. Having great organizational skills is always a plus in a surety bond company’s eyes. Lack of organization creates problems which inevitably leads to an unsatisfied client. Staying on top of things helps surety companies see that the company applying for an increase is worthy of it. Organized businesses are much easier to evaluate and predict future success. You really don’t want problems even on the smallest project. Stay on top of things!

Establishing Trust With The Surety Bond Company

One of the first steps to increasing your bond capacity is building the trust between you and the surety company. How to actually achieve that? It’s quite simple actually. Just be honest and apparent. Your preferred surety partner deals with this every day. They’re always on top of things. Just as you should be. Deceiving the surety company and the client is a clear indicator that you’re not running parts of your business in good faith and that your business is not going to receive a clean bill of health. So to tackle those problems, always submit any needed documents on time and keep your financial records updated. If you’re dealing with new projects, we would advise you to always stay in contact with the surety company, keep them updated about the project, submit the properly filled out paperwork, and always plan before you’re submitting it – never on tight deadlines! It shows you’re not planning ahead. 

Navigating Successfully Through Multiple Projects

As we previously mentioned, there will be a time where you’ll win new projects while still working on others. It is a necessity in any business to be able to successfully navigate multiple projects at a time. No matter the size, the complexity, and the monetary value of it. This shows your business is stable, well organized, and trusted by the clients. Your portfolio is your biggest advertisement. Whether it’s a huge or small project, diversify the type of jobs you’ll eventually take on while staying inside of the zone of your expertise. Advocating and accepting projects that are not a part of your field (and not doing them accordingly) can lead to reputational issues across the board. Surety bond companies look at how their client has handled previous projects, the scope of talent in the client’s team, and the relationship between people (subcontractors) that trusted them with various projects. You cannot skip through some magic hoops and end up with a multi-million dollar project after only working on a small local one. Everything takes time, including increasing your bond capacity. Invest in your experience, it’s the best strategy for growth.

Being Liquid/Solvent Enough (Having Cash On Hand)

We cannot state this enough – low debt, tangible assets, and liquidity. Sureties want to see that you’re going to be able to repay a bond claim should one occur and still stay solvent. Of course, no one wants a claim to be made against one of their active bonds but it can happen in this industry. It’s a simple matter in theory but in reality, a really difficult one for many constituents. If companies want to grow their business and their bond capacity, they need to put an accent on tangible assets. These assets need to be easily valued and liquidated if a claim is threatening the viability of the company. Cash is a staple in every industry and the more you have it close by, the easier your life will be. Reinvesting the profits into your business also strengthens the balance sheets of your company and could lead you to a better future.

How Bonding Solutions Helps Your Business

Whatever may be the case, this list will certainly help accommodate your company’s growing appetite. The most important step of the process is choosing the right surety bond partner who’s going to follow you down this road. That’s why we, at Bonding Solution, exist. Clients seeking their bonding capacity increase should connect with our team today

Bonding Solutions – Partner Of Your Choice

Bonding Solutions is a surety agency that caters to unique clients’ needs. Our mission is to help you obtain the surety bond capacity of your needs. With over 60 years of combined experience, we provide tailored bond programs to clients. We strive to make the surety bond process easy. Our company is here to help you gain ground and advantage in your respective and competitive industry. Apply online or contact our team directly for more information.

 

published on Friday, October 1st, 2021

Questions?

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(877) 841-6745