Financial Statements: Are the key to obtaining Bonds?
Need a bid or performance bond for a construction project? The first question is, “Let’s take a look at the fiscal year-end financial statements.” Then the insurer finds something wrong with it and boom! You’re dead!
What’s going on here? It is true that the surety only make money when they issue bonds? So why are they so reluctant? Contractors must keep in mind that bonding companies walk a fine line between profit and loss.
Contractors must keep in mind that bonding companies walk a fine line between profit and loss.
Easy obvious piece subscription information to review is the year-end financial statements. This document provides a vision of the company’s currency position. This shows the extent to which the administration has failed to attract sufficient income. Show lending practices of the past and indicates the quality of the clientele of the company. It is easy to calculate, easy access, an essential component of subscription – but it is the key to getting bonded?
The financial statement is only one element in the decision making process. Bail decisions are how to make soup. We look at the company’s previous experience, quality of management and monitoring capabilities, plant and equipment and the current workload. Credit relationships are tested as are the plans for next year. All these elements are reviewed and must result in the insurer’s confidence that the company will succeed without defect claim or bonded labor – then the bonds may be approved.
So the statement is not the key link is only one key element. The successful candidate must present a compelling presentation of facts covering a wide spectrum.