Because the surety relationship is so critically important to the growth and development of your construction company, maintain a close relationship with your bonding company whether you seek to establish, grow or maintain your bonding capacity.
Get to know the surety company
What ratios and figures does it consider most important? What kinds of companies does it underwrite? Some mainly serve large contractors, while others specialize in new or smaller firms. You will establish a stronger relationship with a bonding company that tends to serve your type of company.
And get to know the surety’s home office as well. A local underwriter may understand your underbilling strategy, but if the home office only sees figures on paper, and not the capable, trustworthy company that stands behind the figures, it may discount your worth.
Be a communicator
Schedule regular meetings — right after your yearly financial report is a good time — and keep up a flow of clear, well-presented financial information and job status reports.
Surety companies know that problems arise in construction projects; what they want is accurate and detailed information. So don’t surprise a surety with bad news late in the game. If you see trouble brewing, bring your surety into the loop immediately.
Also, notify your bonding company of changes in your company, such as shifts in ownership or top management and forays into new markets or specialties.
Communication is a two-way process. While you’re telling an underwriter about your business, listen closely.
Surety companies want contractors to succeed on projects, and if a surety believes your firm might not succeed, understand why and address those issues in your business. The surety has real-world experience, and its reluctance to write a bond indicates real problems.
Ensure utmost integrity
A surety wants complete confidence in a contractor’s integrity. Unjustified bonuses, questionable loans, powerboats on company accounts and well-paid relatives with vague responsibilities are all danger signs.
Also, no bond applicant should ever try to hide assets. If the worst happens, the surety will find those assets and take them, and bill you for the effort.
And remember, bonding companies don’t just look at your bonded work. They view your entire backlog as potential risk. If you’re losing money on a $20-million unbonded project, why will you do any better on a bonded $10-million job?