The Expert Podcast

If you are a builder or a contractor and you're constantly getting surety bonds for bids or for contracts you may want to look into setting up what's called a surety bonding facility and what that entails is you actually create a um kind of like a line of bonds that you can use at your discretion in order to bid on projects start contracts and not have to go back to the underwriting of bonds every single time so how do you do that well in order to set up a builder surety bonding facility is what it's called the contractor will first start with your surety bond provider and you have to provide some financials you've done this before when you've um created oneoff single uh use surety bonds but you have to Pro provide financial information about the company about your business uh maybe some back back ground on the kind of projects you've done maybe individual backgrounds on the principles um financial information also creditworthiness to make sure that you have uh funding capacity should uh a project go into overrun.

And then you'll negotiate the terms of that bond in terms of the coverage amount what's your highest limit what is that uh bonding facility give you as a max amount of surety coverage that you have and also who are eligible as um as Bond recipients as the principle you can designate different what's called an obligee which is the person or company requiring this surety Bond and you may have certain limits on who you can designate as an obligee but part of having this surety bonding facility set up is you can actually be more responsive to contracts.

The key steps you need to set up to get that facility in place is to identify what bonds you might need in the future are they construction bonds are they bid bonds are they performance bonds Financial bonds and then determine what types of bonds you'll need make sure that the bonding facility company you're using issues those types you also want to make sure that that company um has a long-term capacity for their appetite because as your needs for bonds develops over the next few years you want to make sure that that Bonding Company or What's called the surety will be able to um absorb those needs.

You also want to make sure you keep up to date your financial documents they may want updated uh pnls or balance sheets to to keep track of your financial condition and the underwriting is typically a one-time event for the initial facility but they may want to update it throughout the years to make sure that it's still applicable or if you want to expand your capacity you may want to do more uh underwriting.

The things that they're going to look at is obviously credit score your net worth uh meaning your assets uh your liabilities if you have any prior claims that's going to be an issue to make sure that you're not constantly failing on performance or failing on contracts and if your company expands if you add more employees if you add more footprint that may be a good thing it shows that you're growing especially if your finances improve uh commensurately.

So if you are constantly getting surety bonds for contracts performance bonds bid bonds you may want to instead set up a bonding facility for your organization so that you can do some of your own um self-issue of the surety bonds and you know that going into a contract or a bid you have the the surety bond pre-approved so to speak so you don't have to wait the underwriting time for that contract to be valid.

If you have more questions about arranging for a surety bond facility or for individual bonds you can contact at us Link at the link below probonds.com thank you for watching another episode of actual human advisory on describe TV remember we have live one-on-one consultation appointments available at actualhuman.com where you can book a one-on-one undivided attention live call with a licensed investigator a licensed insurance broker a licensed mortgage broker real estate broker uh I'm also a certified real estate title examiner a certified civil court mediator along with having developed and started over 15 businesses several of which were sold for millions of dollars so if you do have questions in any of those categories you can arrange a one-on-one live video consultation use the link below and we'll see you on the next video.