Occasionally, established contractors that do not do bonded work in normal course of business are asked to provide performance and payment bonds. One issue that sometimes arise in these situations is the contractor does not engage a construction oriented CPA to provide review quality financials statements. Performance bonds without CPA financials on a small scale may not be much of an issue, however, once the bond size grows beyond $750k to $1mm, lack of CPA prepared financials will make it difficult to secure the bonding. Surety1 represents several markets that are addressing this niche. With what is commonly referred to as a total net worth program, sureties are providing performance and payment bonds, sometimes in excess of $2mm, without CPA prepared financials.
These programs are best suited for established contractors with successful track records who may have had difficulty bonding simply because they lacked CPA-prepared financials. By supporting single bond requests 0f $2 million or more within an aggregate of up to $5 million, these net worth programs can fulfill the demands of modern contractors whether they have occasional or recurring bonding needs.
The underwriting information requirements are simple. In most cases all the surety will need is:
1. Complete Contractor Total Net Worth Program Questionnaire.
2. Provide a personal financial statement.
3. Provide two years of personal and business tax returns.
Most contract bond programs require that contractors meet a lengthy underwriting checklist including a current CPA-prepared financial statement. The Net worth underwriting programs are based on the premise that applicant’s ability to accumulate significant personal net worth can be equally indicative of his or her qualifications. With less documentation required upfront, you can save time by doing less paperwork while also being approved faster.
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