A company’s financial statements are the underwriters next consideration. Like loan officers at a bank, a surety company underwriter weighs your financial statements very heavily when determining whether you represent a risk of loss. Again, surety bonds are a credit facility, and the surety company wants to make sure that your company is good on any losses that might be sustained. On the assumption of zero risk, the underwriter is charged by the surety company with making sure that a company has sufficient financial strength to weather any difficulties on a project and ensure prompt, full repayment to the surety company in the event of a loss on the surety bond. Positive working capital, ample and/or increasing shareholder equity, readily available credit, consistent profitability from year to year…all of these are important elements in the underwriter’s financial analysis.
Due to the very conservative nature of the surety industry, underwriters generally will not speculate about the financial strength of your company. If you want them to recognize your company’s financial strength, you have to understand the differences between the different types of financial statements available to you and help your accountant prepare the strongest presentation possible for your company. This will take additional time on your part, and restated financial statements are going to cost you more than the statement prepared straight from your company’s income tax information. However, in most cases, the benefits to your surety relationship will be remarkable, and your ability to bid on more and larger bonded projects may well be worth the investment.
Goldleaf Surety’s knowledgeable and experienced staff knows what’s critical to the underwriting process and how to supply you with feedback to improve your bonding ability and limits. We excel at providing consultation on what changes can be made now and into the future that will have a direct impact on prospective bonds.