Construction Bonding In The Year 2015 And How It Impacts Michigan Contractors

The Surety Market In 2015 a significant shift has occurred in surety’s appetites for bonding and covering more bonded work. Across the nation contractors are showing better financials and experiencing positive economic trends that make sureties more comfortable bonding more work and bigger jobs. In Michigan, the sureties recognize a large opportunity. As early as 2014, several large sureties in the US were hesitant to bonding contractors in Michigan due to areas like Detroit being seen as insolvent and the uncertainties of future funding. Watching through a microscope, the sureties became comfortable with the strength of the contractors remaining in the market and the commitment to improving infrastructure and building new improvements. This has been a big change over the past 12 months.

Are You Getting More Work? Less Competition Recession & Attrition Stricter Guidelines More Bid Opportunities Money Flow – Public/Private Commitment To Rebuilding Better Margins Specialization & Staying Local Economic Improvement Recession cut deeper and was later in Michigan than the rest of the country, but signs are that this has turned and trending in a positive direction. Detroit municipalities and other parts of Michigan are loosening up money and committing funding to improving infrastructure. Some private jobs/banks now requiring bonding, but overall money is flowing better than 5 years ago. Some contractors have gone to specializing their companies and taking advantage of positive market conditions.

How Can You Improve Your Bonding Rates And Capacity? Contractors are taking advantage of recent strong years along with the sureties being more receptive to pushing limits and offering lower rates. One Of The Most Important Elements To A Company’s Growth Is Having A Successful Bonding Program.

Avoid Large Distributions Financial Records Presentation Other Considerations Tax Return/Internal Statement Ave. $300k - $500k single job/$1.0 million aggregate Financial Compilation Ave. $500k - $1.5 million single/$1.0 million - $3.0 million aggregate Financial Review Ave. $2.0 million plus single/$5.0 million plus aggregate Working Capital Avoid paying cash for equipment & short term debt Reduce Receivables to 90 days or less Establish business line of credit if possible Subordinate Debt Owner funds borrowed by the business Postpone repayment or put priority in secondary position Avoid Large Distributions Try to keep money in the company from year to year Working capital and equity are the two critical elements on financial statements If you’re looking to improve your bonding capacity and lower your rates, having open dialogue with your bonding agent is crucial. It may also make sense to connect your CPA with your agent so everyone is on the same page. Explain the differences between financial presentations.

What Is Your Experience? What type of work? Largest job sizes. Largest work program. Job references. When was your business established? Have you been bonded before? Consider this your company’s brag board. You may want to start a portfolio of jobs you’ve done with names and references. Some companies also prepare resumes and bios of key employees and owners, showing the surety their experience and expertise.

Who We Are Not all sureties are created equal. Many contractors go to their insurance companies for bonding, only to find limited options and agencies unfamiliar with construction. You need to be with an agency that understands your business who will help you grow and stay competitive.

Bonding Specialists Established In 1997 Largest Bond-Only Agency In The Midwest 17 Markets For Placement Combined Over 80 Years Of Bonding And Construction Experience Experts At Working With New And Hard To Place Contractors. We understand your business and work to help your company stay competitive by providing the best rates and limits in the market, along with excellent service with fast bond processing turn times.

Stay Competitive If you aren’t bonded now, or think your bonding program could be improved, it’s a great time to get a bond quote. The application process is free and easy with no obligation. J. Ryan Bonding will provide you with bonding options that will keep you competitive so you can bid on more work. Fast underwriting turn times – lowest rates – higher limits. We’ll also work with your company as it grows to keep you competitive.

Thank You! Thank you and best of luck this year and beyond!

Aaron Sundeen Michigan Producer Offices in Wisconsin and Michigan Office (800) 535-0006 Cell (651) 210-6983 asundeen@jryanbonding.com