Starting a new business is no easy task. Every new business owner goes through the stress of getting on their own two feet, but a construction contracting business can be very complex. One of the unique challenges of the contractor is the fact that they have to attain a variety of legally required permits and bonds. A contractor’s ability to obtain to secure work, especially in the public sector, is severely limited, if not unattainable, without the proper surety bonds. Many surety bond providers will offer a complete list of the bonds needed for a business owner including: bid bonds, performance bonds, labor/material payment bonds, performance, supply, and license bonds. The first step towards establishing surety capacity is to contact a professional surety bond producer who can understand and meet your needs.
While starting your contracting business may look like an uphill battle, the surety industry is not quite as intimidating as it looks. According to the Surety Information Office (SIO), “The surety industry is reaching out to new and emerging contractors to help them obtain their first bond, increase bonding capacity, and ultimately become better businesses.” In the SIO publication “Helping Contractors Grow: Surety Bonding for New and Emerging Contractors” there is a variety of information that includes tips on your relationship with your surety company, the prequalification process, and programs for new and emerging contractors.
The majority of your concerns with your surety company should focus on their knowledge and compatibility. Do they fully understand the surety process and all the unique underwriting standards of your particular bond? Do they match your needs as a contractor? These should be simple and easy questions to fill out once you have meet with a professional bond agent. The real pressures of obtaining a bond are the pre-qualifications, which are consistent for every contractor. It isn’t all about your financial strength (that is just the first step). According to the SIO publication, bond companies look for “good references and reputation,” “the ability to meet obligations,” and “experience that matches the contract requirements.” They want a clear picture of your company, and well-rounded proof of your future success.
The most encouraging piece of information is the existence of programs that are developed specifically for helping new contractors obtain their first bond. Many surety companies have developed programs such as the “Model Contractor Development Program,” along with all the information available through the SIO. The Surety & Fidelity Association of America (SFAA) and its members work to ensure that bonds are available and accessible to qualified contractors through the Model Contractor Development Program. They provide education on becoming a bondable business, assist in finding federal, state, and local resources, along with help during the actual bonding process. A surety bond is meant to keep up business and service standards, not bring business owners down.
For more information contact Tommy or Zach at 513-372-6232