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Discussion Starter · #1 ·
Hi, I am new to this site but looking for lots of good information and tips. I am not new to the industry but we started up a brand new Design Build company this year. Both of us quit our salary jobs and went on our own - CRAZY and now we are feeling the major stress! Our biggest obstacle right now is the lack of bonding capability. Since we are new, we can't get much to bid on some of the higher public jobs. IS there anyway to get around that? Please give us any and all advice on how to get bonding quickly!. I also am working on our company marketing pieces. Looking for creative tag lines. ANy ideas would be much apreciated.

Thanks - sheetsdb
 

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With the current economy, surety bond companies are going to take a long look at a company before offering to bond projects larger than $250,000. Too many contractors that jump into their own business or flip from residential to commercial expect too much from the markets at this time.

When assessing your own company, you have to keep in mind that not only is your track record going to be scrutinized, but the financial status of both the business AND the individual owners will be taken into account. Unless the company has very solid verified (CPA-prepped/audited/reviewed) financials, and the ownership has strong personal credit, it is rare that a surety company will take a risk on a client for more than a $250,000 single/$500,000 aggregate line out of the gate.

It's not just whether or not a contractor is capable of doing the work. The financial picture is vital when the surety assesses whether or not they feel subs and suppliers won't have to put liens on any property as well. There are many very qualified contractors out there that could handle the physical aspects of projects well beyond their bonding availability.
 

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Discussion Starter · #3 ·
bonding

You are saying exactly what we have already heard and what I really want to know is how can we get around that. We are a qualified contractor and are ready to begin work, but are running into road blocks. There has to be a way to do work without being bonded for full packages. We are also looking at private work which may be our way to get some work, but there is so much public work out there.
 

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There isn't any way "around it", unless you post an agreeable amount of collateral with the obligee (usually 100%, perhaps more, if they're willing to go that route at all) that they're willing to hold until the release of the project. If a contractor isn't able to obtain a viable amount of bonding, then they won't be able to perform projects of a level they feel to be commensurate with their capabilities. Sometimes you can negotiate to have bonding requirements waived, but it's rare, and I've never seen it done with projects over $100,000 or so.

Even if a contractor is qualified for jobs in excess of $1MM from a financial and track record standpoint, if the job is their first relationsip with a particular surety, they may STILL be asked to post a sizeable amount of collateral (perhaps 20-30%).

Surety isn't underwritten like insurance, it's a financial backing and guarantee from the issuing company. The only way that bond capacity issues can be avoided are to start with smaller projects and bond lines (cultivating a working relationship with a surety may make them consider larger projects that other companies might not), or not to do bonded projects.

The reason contract bonding is so hard to obtain is because the companies that made it too easy years ago are no longer in business. There isn't even a "high-risk" contract bond market to speak of.
 

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JumboJack for president!
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Basically start small. Start with some below 250k public jobs and a few years down the road. Reapply. Dont bite off more than you can chew.
 

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If you are looking to "get around" any legalities, you will not find a lot of help from most the members of this forum.
 

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Good Advise

All the advise you are receiving is right on. As a new company, you have the application only programs available from a few sureties or use collateral to get into larger jobs.
 
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