Bonding Program Debt Ratio Bonding Options Financial Statements Payments Summary Getting Started 1 Relationship Between Relationship Between Bonding & Finance Bonding & Finance Part II What Bonding Companies Seek in a Balance Sheet
http://www.Cash4Impact.com, Finance & Bonding Relationship Pt. 2, This narrated video presentation continues the discussion regarding the relationship between a construction company's financial statements and the bonding it obtains. [email protected], 404-642-0509
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1. Relationship BetweenBonding & Finance Part II What
Bonding Companies Seek in aBalance Sheet
2. Bonding Program Determinants
What else determines bonding programs?
List of jobs on hand.
The year in perspective.
Spectrum of jobs performed and anticipated for the year; those
from the previous year; contract value of each job; length of each
job.
Does the company average jobs of $200,000-$300,000 but
occasionally garner projects of $1.5 million?
Is there a large job thats scheduled to commence in a couple of
months?
www.Cash4Impact.com 3. Debt Ratio Needs What can you do?
Bonding companies seek a 3:1 debt ratio on the balance
sheet.
Whatever you can do to decrease your debt will improve your
ratio.
You, an investor or partner can inject equity capital.
Pay off a term loan.
Restructure existing loans.
Bonding companies can tailor the bonding program to fit the
balance sheet. If only some of your projects are bonded, the
tailored bonding program may meet your needs.
www.Cash4Impact.com 4. Bonding Options
Difficulty in obtaining bonds?
SBA-guaranteed bonds.
Similar concept to SBA loans.
3 rdparty indemnities.
These can be provided by the seller if you are buying another
construction company, by an investor, or by a joint venture or
other partner.
www.Cash4Impact.com 5. Financial Statements
Bonding companies prefer reviewed financials & love audited
financials.
With reviewed financials, the bonding company can be certain
that the financials presented to them are accurate and reflective
of the companys true condition.
For a long-term customer, may take CPA-compiled
statements.
However, when that customer seeks more steady bonding or
presents a weaker balance sheet, the bonding company will want
reviewed financials.
www.Cash4Impact.com 6. Audited or Reviewed
Why audited or reviewed statements?
With Quickbooks only data, a companys owner or CFO may add
false data, delete information, or manipulate timing to make
statements look better.
CFO, owner, et al may make mistakes with generally accepted
accounting principles (GAAP).
Need credibleexternalsource (CPA) reviewing the information.
CPAs and their accounting activities are regulated.
Outright fraud is always illegal but can be difficult to prove
unless glaring.
www.Cash4Impact.com 7. Guarantees & Payments
Most bonding companies like personal guarantees.
Or other guarantees to 100% of the bond.
Remember, bonding is NOT insurance.
Bonding, less a risk product than a finance product.
Bondings purpose - to ensure the project continues smoothly
with minimal hiccups.
In rare instance bond must pay, bonding company
expectsfullreimbursement of their payouts.
www.Cash4Impact.com 8. Summary
In general practice, if the bond company must pay out:
To the extent that it was their customers fault through overt
negligence or fraud, the bond company will
pursuefullrepayment.
To the extent that it was not their customers fault AND the
customer helps them as much as possible to mitigate the payouts,
the bond company will pursue onlypartialrepayment.
www.Cash4Impact.com 9.
Additional Information:
Solving the CapitalEquation:
Financing Solutions for Small Businesses
Available on Amazon
Getting Started 10.
Thank You!
Contact Us Tiffany C. Wright Follow my blog, Cash for Impact:
http://www.Cash4Impact.com Tiffany C. Wright The Resourceful CEO
Toca Family Business Services