How to get your first bond
Website design By BotEap.comIf you have found your way to this article, you no doubt already know what a bail bond is, and now you need one.
Website design By BotEap.comYou may have recently selected a set of plans for a bid, and lo and behold, there’s a fun little section titled “bid guarantee” that requires bidders to include a bid guarantee for 10 percent of their bid, which not exceed $20,000, or anything like that.
Website design By BotEap.comYour next question is, of course, “where do I get a bond?” Fortunately, there is hope, maybe not for this particular offer, especially if it comes in a hurry (like tomorrow). .” More and more contractors are turning to public tenders (state and municipal government works, for example) these days because that is where the money is, rather than the private sector. However, the public sector is not a complete panacea, competition these days for public works is fierce in most cases and profit margins are squeezed as a result.
Website design By BotEap.comBack to basics. Where do you get a bonus? At this point, your first step is to contact a local bail bond broker. Head to nasbp.org for a listing in your area, or better yet, ask your friendly competitors and other construction contacts who they use. Now call the phone and explain your circumstances to the brokers you have been referred to. An experienced bail bond broker will be able to guide you through the process and, just as important, set expectations. Not everyone is “bondable” and this is important. Remember, security is NOT insurance.
Website design By BotEap.comDepending on the size of your bid estimate, there are generally two paths your broker can take with your bail bond application. In most cases, for offers of $250,000 or less, you can expect to complete a two or three page application. And if you have a personal credit score of 650 or higher, and you meet some additional job-specific conditions (scope of work, length of work, etc.), you can reasonably expect your offer to be approved on this basis. There may be some additional criteria, depending on the bail bond company, but for small offers in this range it can be a fairly quick and painless process.
Website design By BotEap.comFor offers over $250,000, and/or if your plans involve a total accrual of over $250,000, the standard for guarantee approval is much higher. In fact, the differences between small bond programs and a “market standard” guarantee program are great. Establishing a standard security program requires a lot of financial documentation and is generally not a quick process. Be prepared to provide your broker (and potential bail bond company) with the following, at a minimum: the most recent fiscal year-end corporate financial statement (ideally prepared as a review and based on a percentage of completion); recent personal financial statement for each business owner; old accounts receivable statement that links to the year-end balance; current work-in-progress statement; corporate tax returns…the list goes on.
Website design By BotEap.comYour broker should be able to guide you regarding the above, but a CPA with construction experience will be critical here. As for my accountant friends, it never ceases to amaze me how many CPAs can’t muster an exact percentage of complete financial status. Bail bond companies depend on accurate financial reporting, and having the right CPA can mean the difference between getting bail bonds…and not getting bail bonds.
Website design By BotEap.comThere is much more to the process, of course, but the emphasis here is on how to get started. Obtaining the easement (and remaining in bondage) is a commitment of the contractor. Get an experienced bail bond broker first and make sure their CPA is on board throughout the entire process.