5 questions to ask before selecting a bonding agent for your company
It is often seen in the construction industry that project owners or general contractors request a construction surety bond to protect against contractor or subcontractors default. In order to get a construction surety bond, you need to contact a bonding agent at first.
A bonding agent plays the role of a bridge between you and the surety provider that determines which type of surety will be suitable for your requirements.
However, not all bonding agents have equal capacities. So how will you ensure that you are with the right one? Here is a list of five questions that will help you find the right bonding agent.
1. Is your bonding agent your advocate?
Your bonding agent looks for the best possible bond deal for you that will not only be an appropriate choice for the project but also for your financial situation.
He must put all his effort to prove to the surety that your company will be successful in the project and secure the best bond price.
An efficient bonding agent holds sufficient knowledge on the best market price for the kind of surety bond you require.
Additionally, you need to figure out whether your bonding agent is truly independent or tied to certain bond insurance companies.
Even if it is the latter, that does not indicate that the agent can’t advocate for you but still, it is important to know.
2. Is your bonding agent active in the construction industry?
Although it is not necessary for your bonding agent to only specialize in the construction surety bonds he must be well informed about the happening in the industry.
So try to look for a bonding agent who is an active member of construction industry associations.
3. What do your bonding agent’s references say?
A stand-up agent can be a great source of reference for you and don’t hesitate to ask them for references.
While having a telephonic conversation with your agent, make sure that you ask him if he is willing to support your clients.
The construction industry has a tough environment and you would always want a bonding agent who is not afraid to fight for you.
4. Does your bonding agent show red flags on your financials?
In order to determine whether or not to issue a construction surety bond, it is an insurance provider’s responsibility to scrutinize a contractor’s working capital (current assets minus current liabilities) and equity.
An error in your financial statements could negatively impact your bonding capacity or even your ability to secure a bond.
However, a knowledgeable agent can help you here by reviewing your financial data and looking for potential issues.
In case of inaccurate information or errors, he could connect you with an accountant who can help you clean up your statements.
5. Does your bonding agent stop you from overspending on your financial reporting?
Your agent may need a compilation, review or audit of your financial statements, based on the type of surety you need.
It is true that sureties would always prefer it if every bond applicant was audited but it is unrealistic.
Your bonding agent needs to accurately match the level of reporting you to provide with the level of bond you need.
Well, answers to these questions will definitely show you the right direction to select a bonding agent, there may be other aspects related to insurance that you may consider.
A professional accountant and a knowledgeable commercial insurance agent in California can help you understand your options. Get in touch with NoHassleIns.net today.