Transition from a Fastbond Program to a Standard Bond Program
Here are some important reasons why a contractor would want to transition from a short bond program, or Fastbond, to a standard bond program - and how to get that started.
Why a contractor would want to upgrade their bonding capacity:
- The cost of the bond itself. Fastbond programs are for the contractor that has occasional bond needs and are typically at a $30 rate. Standard program rates are significantly less, enabling you to pass the savings on to the obligee within your bid.
- The contractor wants to grow. Any contractor wanting to grow and take on larger projects will need a standard bond program. Larger, longer lasting projects will require a standard program. Fastbonds have a size threshold of just over $1MM.
How to move from a Fastbond program to a standard program: Standard bond programs require more sophisticated financial information. A contractor can increase their bonding capacity with a standard bond program by following these key steps:
- Increase the quality of your financial statements by using a CPA. CPA prepared financials add credibility to your case. A CPA, preferably a construction-oriented CPA, will understand the importance of tracking income and billings and can provide the percentage of completion format when needed. CPAs will know how to project your financial profile in the best possible light. Money saved on the cost of your bond program will more than pay for the addition of a professional CPA service.
- Grow working capital and corporate net worth. Forgo taking large bonuses, or making large capital equipment purchases. This will improve your balance sheet, and tell a more convincing story about your longevity and ability to remain solvent.
- Show proof of internal controls. Receivables, payables, inventories, and personnel/payroll are common internal controls. Contractors can strengthen reliance on operations and financial reporting with additional controls such as unannounced job site inspections; approved contract forms/change orders, and a written safety policy to minimize job site hazards.
- Provide information about the job to be performed. The more in-depth information you can provide the surety about the job, and your ability to complete your requirements, the more confident the surety will be in providing the bond.