Surety Advice to Start-Up Construction Company Owners

Most of the surety prequalification process is based on a proven track record of successful project completion. So, how do you best represent your start-up construction company without that track record? Start by winning and finishing a few private jobs before pursuing public work. It shows that the new company can successfully complete a contract at a profit.

For closely held construction companies, sureties provide credit to the people who own and manage the companies that they underwrite. Good resumes for the owner and key employees should detail their education, including any licenses or certifications, the companies they worked for, and the progression of responsibilities leading the owner to start a new company.

It’s personal

Meet with the surety representative and your commercial loan officer in person to tell your story, and be sure you know your numbers. If the company’s owner has to defer to the controller or accounting team to answer significant financial questions about project performance, the underwriters will be put off.

If you are initially rejected, ask what changes or improvements you can make to qualify. Your surety agent can advise you on your strengths and weaknesses with regard to qualifying for surety credit.

Have a written business plan

The best thing a new construction company can do is to assemble a team of advisors, including a surety professional agent, a construction-oriented CPA and a construction-oriented bank representative. Each has a role in helping you launch your new company. The CPA can help implement effective internal accounting and cost controls, as well as set up internal systems to produce accurate financial information for the company’s management and the surety company.

You also should have a written, realistic business plan that includes information about the construction market you intend to pursue, for example:

• What are the upcoming project opportunities?
• Who are your competitors?
• What is a realistic estimate of the market share you could capture over time?

With some careful preparation, start-up construction companies can have a good relationship with a surety underwriter — an important component of their long-term growth and success.

Read more at Advice From a Surety Underwriter to the Owner of a Start-Up Construction Company.

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About the Author

By Dan Pope. As SVP, Underwriting, Dan Pope is responsible for fine-tuning underwriting operations and continuously improving the underwriting philosophy and appetite of Old Republic Surety. He can be reached at dpope@orsurety.com