Date Published: December 13, 2012

A construction company, like many other companies I suppose, can and evolve over time.  The owners and founders of most construction companies are builders & tradesmen, an obviously important strength, and for this reason, a lot of the owners of construction companies find the bonding process, frustrating and confusing.  The underwriters of performance and payment bonds for construction companies are not builders and tradesmen, they are usually bean counters; finance and accounting majors dominate the surety company side of the business.

Given this difference of personalities, the role of the professional bond agent is, to a large extent, bring these two sides together   There are many bond companies and each has their own underwriting criterion.  Some have “more tools in the tool box” then others, and a good agent will be able to recognize when some of these tools will no longer be necessary. This background is the set up for the a performance bond success story.

A general contractor started getting into public work about five years ago.  As a company new to public works, the contractor was forced to use one of the surety companies that have the ability to “structure a deal”.  Through the use of funds administration and some collateral requirements, the contractor was able to build up a pretty decent bond program, and completing about $2 million on public works construction a year.  Better yet, the contractor was profitable, had hired a construction oriented CPA firm to prepare the FYE financial statement, and had established a bank line.  The surety company still looked at the contractor as the problem child that came to them back in the beginning.  The agent’s  primary focus is insurance, not bonding, and  did not know that the contractor had “graduated” from the remedial market to a point it would qualify in a standard market.

The contractor found its way to Surety1 and in about a week Surety1 was able to secure a bond program for the contractor without funds administration and without collateral  at higher levels than they had and a much more competitive rate.   A very happy customer and it did not end there.  The contractor wanted to know what needed to be done to obtain larger bonds.  We said “pay back some of the receivables from shareholders and upgrade to a CPA review and we will be able to get you bigger bonds”.  I can do that was the response and Surety1 has a great new bond client and, most importantly, we have a happy customer  that can now get the bonding it needs to execute its business plan.


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