3 Ways To Lower The Cost Of Surety Bonds As A Contractor
Posted on: 8 March 2019
If you want to work on big projects as a contractor, you are going to have to secure surety bonds. Surety bonds are one of the ways that big businesses and the government ensure you get the job done on time and that you follow through on the contract. The truth is that surety bonds can be expensive and can hold you back if you don't have the capital to secure one. You can take steps to lower the percentage rate you are charged for a surety bond.
Be Aware of Your Personal Credit History
Be aware of your personal credit history. You need to know what your credit score looks like. If your credit score is not that high, you are going to want to take steps to improve your credit score. Make sure that you always make loan and credit card payments on time and do what you can to lower your debt to income ratio. Figure out what is dragging down your credit score and take steps to raise it. The better your personal credit score is as the owner of the business, the less a company will charge you for a surety bond. If you have a low score or negative remarks, like for missing a payment or defaulting on a loan, you are going to face higher percentage points when you try to secure a surety bond.
Have Your Business Finances in Order
Second, you need to have your business finances in order. Have a system of keeping track of all your finances. You want to have records that show what you paid for previous projects. You need to have records that show all the payments you made and all the money that you brought in. Being capable identify the assets your business holds and any liabilities as well is helpful. Having a strong accounting system and records will help you get a lower price on a surety bond. Being able to show that you run a financially responsible business and that you keep track of all transactions will help you lower the percentage you are charged to secure a surety bond.
Have A Plan for Collecting Payment
Third, make sure that you have a plan for collecting payment. Show how you collect payment from customers. For example, you could show your invoicing system that you send out to clients. You could get together the letters you send if a client is late with their payment. You could show the contract you have with a collection agency to pursue clients if they don't pay. Showing that you have a set system for collecting payments, and going after those who don't pay, can help you secure a lower percentage rate on your surety bond.
If you want to lower the percentage rate you are charged for a surety bond, make sure that you keep your business financials all together and up-to-date. Have a system in place for collecting payment from customers. Be aware of your personal credit history and work to improve your credit score. All these actions should help lower how much you pay for your surety bonds. Contact a company, like NFP, P & C, Inc., for more information.
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