In the construction industry, surety bonds are put in place to ensure a project is completed within the terms of the contract. On this episode of Built with Billd ,we sat down with Robert Kinder, Managing Director at Alliant Insurance Services, to talk about how contractors can use surety bonds to grow their business.
Surety bonds open up many different business opportunities for contractors because it allows them to bid on more state, federal, and municipal construction contracts. When General Contractors are reviewing bids for a particular job, subcontractors that are bonded are typically favored over those that aren’t. Surety bonds offer General Contractors an extra layer of verification that the subcontractor is going to complete the required work for the project.
Many factors go into the underwriting process for surety bonds, but the biggest things that insurance companies look for include:
- Showing a strong balance sheet
- Positive cash flow over time
- Current availability of working capital
- Past job performance
- Current availability to bank lines of credit
“Underwriters like to see that a contractor has a strong balance sheet, is ideally cash heavy, and that they can bank lines of credit, however, underwriters don’t like to see contractors using their lines of credit – it’s sort of counterintuitive…they view lines of credit as an emergency source for funds.” – Robert Kinder, Managing Director, Alliant Insurance Services