What do bonding companies look for

This calculation determines whether a contractor has overbilled or underbilled on a project. Overbilling has advantages when a job is going well. An underbilling means that a contractor has not billed the owner or general contractor enough based on the percentage of completion as reflected by the actual costs to date compared to the total estimated costs for the job.

This could be a result of the billing cut- off as outlined in the contract. It may be an indicator that a job is less profitable than projected and that the gross profit could be overstated. Either way, underbillings can be a potential sign of poor cash management. Whatever the cause, underbillings that reach 25 percent of working capital raise a warning to sureties, and the construction company should always be prepared to explain what caused them.

Read our article about Insurance and Bonding Basics. If the order was verbal, issued in the field in the rush to complete a job, and then the owner says it was never approved, the contractor may have recognized too much revenue, resulting in a profit fade. Claims can raise concerns, too, particularly when a contractor approaches a new bonding agent. Still, a high number of claims going out or coming in may signal that a contractor has a history of problems with owners or suppliers.

As for claims against the contractor, they represent liabilities that can reduce profit on the job. Meanwhile, it might consider a joint venture. Some contractors can increase their effective surety limits by leveraging the strength of another firm, usually a larger one, in a joint venture. Preparing a company for bonding success is complicated — like the construction industry itself — and it requires a strong team.

You can get a quick estimate of your bond cost by using the online calculator. Bond duration varies and could be one year, two years, or more.

Unlike other agencies that also offer various insurance products, the company specializes in surety bonds alone. For construction bonds , MG Surety Bonds sits at the front of the class because it has specialized in this complex type of bond since the s as part of the Miller Group.

Construction bonds can have several layers to them, so we chose MG Surety Bonds as our best resource for construction bonds thanks to their experience and focus on these intricate products.

Construction bonds include:. In addition to construction, MG Surety also has an added specialty in the oil and gas industry. If the contractor needed to extend this an additional three months:.

MG Surety Bonds is a broker and only offers surety bonds. Treasury-Listed markets that enable them to offer several specialty programs, Bryant Surety Bonds is our best choice for contract bonds. In addition to their expertise in contract and performance bonds, Bryant Surety can source a variety of bonds on license and permit, construction, freight broker, court, and fidelity bonds to name a few.

They also have a bad credit surety bond program available for commercial bonds. This company specializes only in the surety bond niche and does not provide other insurance products and services. Gallagher is the industry leader for commercial bonds because of its global experience, extensive relationships at all major surety companies, and their in-house underwriting expertise that enables them to craft custom solutions for their clients.

Gallagher focuses on commercial surety in the health care, higher education, financial services, construction, and public utilities industries both the private and public sectors. Their commercial bonds include license and permit, court, public official, and customs bonds. Cost and terms of bonds differ based on the state that requires the bond, the specific type of bond, industry, size of bond amount, and the credit history of the business.

Gallagher is a broker, so they perform by creating a single point of contact for principals while they find the best-fitting, lowest-price surety products from the marketplace. Terms will start at 12 months but can be tailored to longer durations from the outset, or as add-on surcharges. Aside from surety bonds, the company also provides over 20 types of insurance products and consulting services for 15 different types of commercial benefits.

Simplified explanations of the differences between probate and fiduciary bonds , and between surety and insurance. We value SuretyBonds. A custodian bond, which is a type of probate bond, ensures an appointed custodian will care for an individual and his or her finances ethically and according to directions endorsed by a court ruling. These bonds are frequently required of court-appointed custodians who care for minors, the elderly, or disabled individuals to protect them from fraud, embezzlement, or other illegal acts.

In addition to probate bonds, the company offers license and permit bonds, construction bonds, commercial bonds, and court bonds. The probate bond costs and terms vary depending on the amount of coverage needed. The premiums are typically calculated at just 0.

The online quote form would be more helpful if it had a drop-down list so the applicant can select their bond type. Direct and to the point, yet still loaded with a helpful glossary of terms, BondsExpress. Many of their bonds are pre-approved. No matter in which state you live and work, you can buy a surety bond from BondsExpress.

They bring value to their clients by approving many people and businesses that have been turned down elsewhere, within hours, with comprehensive underwriting. In addition, they specialize in contractor performance and bid bonds, which they offer with no minimum requirements on financial history, credit score, or net worth. To request a quote, apply online. Some sample prices of their bonds include:. We found surety brokers to be the best surety bond companies because the heart of their business is saving you valuable time.

They shop the marketplace for you to get you the best rates, coverage, and duration. Our favorite overall, Surety Bonds Direct, has a clean, easy-to-navigate website and a simple bond cost estimate calculator. They are licensed in all 50 states and can offer thousands of bond types. A surety bond is a written agreement that guarantees compliance, payment, or performance of an act. There are thousands of different kinds of surety bonds. They are designed to reduce the risk to the parties in case of failure or disruption to the written agreement.

Most bonds are issued for a set term, typically one year, but sometimes two or three. A surety bond is a contract between three parties: the principal the person applying for the bond , the surety the company that issues the bond , and the obligee the entity that requires the bond. The surety company will review the experience, licenses, and credit of both the business and the owner before they issue a bond. Construction bond capacity matters — sometimes more than firms may realize. In the construction industry, bonding capacity is crucially important.

So, what influences capacity? Typically, there are three factors:. Do they make money consistently based on revenues, based on overhead? Do they have the ability to make money on jobs of all sizes within their range?

Are they consistently making profits? We turn to your historical income statement and work-in-process reports to determine your past, current and future financial health. Your debt, your equity and your liquidity matter.

Note that liquidity is key for most people, but that would also depend on the size of the contract you want and the type of contractor you are e. We look at historical trends and see how much change there is between each year. We look at the biggest job a construction firm has completed to date. Yes, of course we ponder that, but we also consider:. Well, hey, it's basically 10 jobs. It's just all lumped into one contract.

It's not too big for them. We were submitting a bid with a contractor we've been working with for several years. The reason he wanted to bid it is because he had just completed a job for the same owner and the owner was very happy with him and invited him to bid this specific job.

We approved the bond and he submitted his bid. Sure, financial statements are important when considering bond capacity, but you have to look more between the lines rather than just running algorithms and analyzing numbers.