Construction contractors new to surety bonds are often wondering exactly what are the performance bond underwriting requirements the surety company is looking for when they review financial statements. We will start start with the most common considerations.
Working Capital – Current Assets less Current Liabilities.
Current assets are cash and assets that expect to be or could turned into …
Any public works contractor, or any construction firm anticipating public works projects will have or will need to have a relationship with a surety bond company. (The provider of bid bonds and performance and payment bonds necessary to pursue public works projects.) The surety will, at some point, require CPA prepared financial statements, prepared using the percentage of completion accounting …
If a construction company pursues public works projects, the company will need to have a relationship with a surety to obtain performance and payment bonds. One of the items that the surety will request as part of the regular financial reporting is a work in progress schedule. This is an important underwriting tool and one that every contractor needs to …
If a construction contractor is a regular user of surety bonds (performance, payment and bid bonds), one universal requirement at some point in the surety relationship is CPA prepared financial statements. There are three levels of CPA prepared financial statements for construction contractors. These three levels are:
Compilation
Review
Audit
With the compilation being the most basic, (and …
Time Running Out for California collection agencies to apply for their license. The Debt Collection Licensing Act requires debt collectors and buyers to apply for a DFPI license by Dec. 31, 2021. Debt collectors and buyers who apply for a license after that date will be required to wait for the issuance of a license before they can operate in …
On November 8, 2021 the U.S. house of representatives passed the Infrastructure Investment and Jobs Act, The bill calls for $1.2 trillion in spending, which includes $550 billion dedicated to new spending. Specific numbers include: $110 billion for roads, bridges, and major projects; $73 billion for electric grid upgrades; $66 billion for rail and Amtrak improvements; $65 billion for broadband expansion; …
In our previous posts, we covered profit fade and underbillings, so with tis post we will attempt to answer, what are overbillings? Overbillings are an item that may come up in a meeting with a surety bond underwriter as part of the pre-qualification process of establishing a surety bond program. The first assumption is that the contractor is recognizing their …
Have a look behind the curtain. Ever wonder about the performance bond underwriting guidelines of qualifying for performance and payment bonds? You are a construction contractor, the surety underwriters are not people with a construction back ground yet they are the ones trying to pre-qualify you. So what are the sureties looking for? Below is an actual new account narrative …
Markel surety, one of the largest providers of surety bonds for the cannabis industry in California, has announced it will not accept new applications effective immediately and will be non- renewing existing bonds effective 1-1-2022 and later. No reason has been given as to why they are exiting this market segment. Most insurance companies have chosen not to participate in …
Performance Bond Underwriting Basics
What are underbillings and why do performance bond underwriters care about them? Let’s start with some basics. Once a contractor gets to a certain level of bond needs (say projects over a million dollars on a regular basis)the performance bond underwriters will increase the amount and quality of the underwriting information. One key requirement will be …
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