Surety bonds are an essential part of the construction industry, and while it’s mandatory for government projects, they’re popular among privately funded jobs as well. Like any business person, you can’t be an expert in all things related to your company, nor would anyone expect you to be. No one expects the head of a corporation to be an expert in accounting, that’s why they hire accountants and the same goes for hiring a lawyer when it comes to handling anything legal.
In this article, we’ll discuss why it’s a smart move and important for contractors to be aligned with a bond specialist for their surety bond needs, as well as for other reasons.
What are Bond Specialists?
Bond specialists, or surety experts, are business professionals who specialize in surety bonds for contractors and are equipped to guide them through the bonding process. These surety experts also help match a contractor with the right surety company, helping to ensure they get the kind of bond they need at the size required for the project wanted. You can think of them as akin to an advocate for you, advising what can be done to prepare for prequalifying for a surety bond and moves your company can make to grow your bonding capacity.
So, why is it important to align with a surety expert?
Bonds are Too Important
Surety bonds are a necessity in the construction industry, and they’re essential to being a successful contractor in the public works sector. Getting the bonds you need to win a bid, like a bid bond, or the bonds required to work on a project, like a performance bond, can make or break the growth of your business. Your bonding capacity and ability to be bonded are directly tied to your success, so this isn’t an area to neglect or risk mishaps.
Anything directly tied to the health of your business calls for an expert hand to help guide you through it. For example, you wouldn’t treat your own injury without knowing how to heal it. So, why would gaining a surety bond be any different?
Insurance Agents Don’t Have Access
Many contractors will turn to an insurance agent for their bond needs and while an agent is able to do it, it’d be similar to calling a plumber to fix your electrical problems. They are trained and specialize in insurance, meaning they don’t have the professional expertise to advise you through the bonding process. Beyond that, because an insurance agent isn’t professionally focused on surety bonds, they wouldn’t have the kind of market access a bond specialist would.
Surety specialists have close relationships with surety companies, which can be a great help in ensuring you get issued a bond. Due to this, they often have access to programs and deals that an insurance agent wouldn’t.
It’s also important to note that not all surety companies are the same. For example, some surety companies won’t issue a bond to newer contractor businesses, and some focus on newer contractor businesses. A surety expert would be able to match you with the company most aligned with where you are and your goals.
To fully understand why it’s important to see a surety bond specialist rather than an insurance agent, we strongly encourage you to read here: Difference Between a Surety Specialist and Insurance Agent
Use this free bond calculator to calculate your total surety bond cost!
You could consider surety bonds under the financial leg of your business, as the requirements to be issued a bond are heavily tied to the finances of your company. As bond experts know surety bonds in and out, they are a deep well of knowledge in all things tied to them. For example, growing your bonding capacity means making financial decisions that will place your business in a better state while also allowing you to secure bigger bonds for bigger projects. A surety expert could help provide guidance in this area on how these financial decisions will impact the business from a bonding perspective.
Another area they can be a great help in is connecting you to other professionals, such as construction-oriented CPAs. Construction accounting is its own animal and is very complex. While having a CPA prepare your financials for bond underwriters isn’t always a must, it certainly increases your chances of securing a bond and is generally a good idea. Since construction accounting is complex, it’s important to work with a CPA familiar with construction accounting, and surety bond experts will know many construction-oriented CPAs they’d be able to refer you to. These professional connections can be a lifesaver when it comes to getting bonded.
To learn more about CPAs and how they are connected with getting a surety bond, we encourage you to read here: Are Financial Statements From a CPA Always Required for Bonding?
Growing Bond Capacity by Growing your Business
It’s been mentioned several times throughout this article, but growing your bond capacity means growing the business. This doesn’t mean making your company larger so much as it is making it more viable and stable. Surety companies look over the financial statements, your work-progress history, jobs completed on time and on budget, as well as other factors that all indicate a healthy company that is able to handle the project you’re trying to get bonded for.
The steps a contractor would take to grow their bonding capacity also help the business improve its financial health. To learn more about how bonding capacity is calculated, we strongly encourage you to read here: Aggregate Bonding Capacity: What is it and How is it Calculated? – CSBA
To understand more about how to increase your bond capacity, we encourage you to read here: 3 Things Contractors Can Do to Increase Bond Capacity Immediately – CSBA
The CSBA Difference
These are the main reasons why it’s important to be in alignment with a surety expert, but how do you know which bond specialist to align with?
We at CSBA have extensive experience and knowledge working with both newer contractors and more seasoned businesses to grow their bond capacity, guiding them to larger bids, and ensuring a long road of success ahead. Surety bonds are our entire professional life, working with surety companies to grow our insight into this industry, and ensuring California contractors are set up for success. We are committed to providing the best possible service to our clients and investing in your company’s needs while being upfront regarding challenges you may face.
To better demonstrate that we at CSBA are the surety experts, go ahead and read these tips then put us to the test. 4 Ways to Determine if You Are Getting Top-Notch Service From Your Surety Agent – CSBA
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