Are you a small business owner trying to navigate the ins and outs of contract surety bonds? Are you running into hurdles? Surety companies determine a company’s “bond-ability” based on several factors and each surety company has its own approach. However, the general approach is in considering ‘the three Cs’: Capital, Capacity, and Character.
Here are 5 tips to help your company get the surety bonding you need with reasonable terms.
- Be Prepared: You’ll make a great first impression if you can quickly provide the initial application documents. This includes personal and business financial statements, possibly tax returns, proof of insurance, bank letters of credit, a resume/letter outlining your experience, and references. You’ll also initially fill out a contractor’s questionnaire.
- Think Ahead: You need to think about where you want to be in the future. Let your agent know. (S)he can help you get there. Remember ‘the three Cs’? Capital refers to your financial health. Surety companies will typically look at your trending health over a three-year period. Capacity refers to your company’s ability to take on scopes of work. If you want to grow and increase the job-size you take on, make sure your end-of-year financial statements and work experience reflect your ability to do so.
- Listen: If your surety agent is advising you to do or not do something, pay attention. Your agent is your advocate and deals with many companies just like yours. They’ve seen what works and what doesn’t work. If you don’t like what they suggest, take the time to ask questions and understand why. It may prove to be valuable down the road even if it isn’t exactly ideal now.
- Communicate: It’s important to keep open communication with your agent. Just like any other relationship, communication can build the agent’s confidence in your company and help avoid turning simple matters into problems.
- Ask Questions: The agent shouldn’t be the only one asking questions. Look at your agent’s ability to get the job done for you. If you don’t understand something, make sure you get an explanation. Knowledge is power. Knowing what is happening with your bonding capacity will help you prepare for future needs.
The U.S. Small Business Administration’s Surety Bond Guarantee Program helps small business owners obtain contract surety bonds with reasonable terms. Working with an SBA authorized agent provides small and emerging businesses with an additional option for growth and success. Start now by visiting: www.sba.gov/osg.