THE IMPORTANCE OF SURETY BONDS
As he explains , it ’ s nearly impossible to avoid personal indemnity . “ If contractors want to perform public works projects , they must have two to three years of strong financials to show that they can cash flow their operations . This means having good credit , having equity in their company , strong supplier relationships , and not having a lot of debt . This is the information that must be reviewed for underwriters to determine if you are bondable .”
Ken suggests working with a CPA as soon as possible to get professional assistance in setting up financial record-keeping systems , such as QuickBooks or similar programs , and in creating personal and business financial statements . “ The credibility and accuracy of the numbers and their presentation are vital , so it is important to invest in and learn how to use a decent internal accounting system .”
Finding a good surety bond broker is key . Ken recommends asking the Contractor Development Program staff for referrals , checking with contractor friends and colleagues to see if they have a broker they are happy with , asking your existing insurance agent , or finding a broker through the National Association of Surety Bond Professionals ( NASBP ). “ Try to find a surety bond producer who has experience in construction bonds and specialty knowledge of underwriting requirements and appetites ; a good broker should be able to suggest improvements for you to strengthen your firm and should know a good CPA , attorney and other business professionals to support you .”
Determining Your Bonding Capacity
Ken Goodwin , Vice President , Surety Division , with Poms & Associates Insurance Brokers , LLC .
If you are a new contractor , you won ’ t have a track record of completing projects , so a surety broker will want to see that you can cash flow the project for which you want to bond . “ Some surety markets have ‘ quick bond ’ programs that offer surety credit up to $ 750,000 for
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