The days of a contractor being able to simply bid a job without solid surety bonding in New York are on their way out. The economy has burned all of us to some degree. Everyone has had to tighten their belts – from the banks lending money for projects all the way down to the NY Construction firms and NY Trade contractors. No one has been immune. In fact, many have had to close up shop entirely. According to BizMiner, of the1,155,245 contractor firms in operation in 2006 – 20.37% had gone out of business by 2008. Now, in 2011, that number has steadily risen.
The work that is available is becoming harder to get. A contracting firm can no longer rely on their reputation to win contracts. More firms are bidding the same job including ones that do not have the proper experience with the work involved. Many are stepping out of their comfort zones and taking on projects they probably shouldn’t just to stay alive. This has not gone unnoticed by project owners and their lenders. Both want a return on their investments and have taken steps to tighten requirements for the contractors bidding the jobs.
One increasingly popular method is taking a page out the playbooks of local, state and federal agencies – Surety bonds. Obtaining a NY Surety line, or NY Bonding line is quickly becoming a necessity to stay competitive. A viable NY Bonding line tells the job owner two very important things: Firstly, if you have the financial security and experience to obtain the bonding line you are more likely to be able to complete the project without much issue. Secondly, and arguably more importantly, if something should happen and your firm is unable to complete the work or pay your suppliers and/or subcontractors, the Surety Company will step in to make sure the project is completed. At the end of the day both the project owner and lenders have a lot to lose if the job isn’t finished.
Contacting a NY Surety Bonding Agent to establish new line or increase your current bonding line is an important first step before bidding that next job. Many projects now require bid security , or reatianage – typically 10% of the contract amount bid. This can either be provided as a check in that amount , , or as a bid bond. While it may seem easier and quicker to put up your own funds as collateral for the bid security, it is not the most prudent option. You are tying up your own funds that may be needed elsewhere and while 10% may not seem like much, if you’re bidding on, or working on six, seven or eight figure project – that security can suddenly become a harder nut to swallow. If have several bids out at once, you can have a substantial amount of your available funds and/or credit tied up that have been applied to reinvestment into your firm or set aside for emergencies.
Having a Surety Bond line set up prior to bidding a job allows you the financial flexibility of using bid bonds. Once a line is established, a bid bond can be approved in about 24-48 hours, and in some cases that same day. Bid Bonds are issued at little to no initial cost to you thereby keeping your own funds available to you.
Another important factor in setting up your surety line with your NY Bonding Agent prior to bidding is that it could greatly reduce the time you need before you are able to begin the work. Once approved by the Surety Company, a bid bond becomes a guarantee that payment & performance bonds will be issued should the contract be awarded. The Payment & Performance bonds must be in the owner’s hands before any work can be started.
Conversely, just as job owners & lenders have tightened their requirements, so too have Surety Companies. The time, amount and viability of information needed to establish (or increase) a bonding line has increased substantially. As such putting up your own funds as collateral for a bid affords no guarantee that a bonding line can be established and payment & performance bonds obtained prior to the scheduled start date. If this should happen, the job could be defaulted to the next highest bidder or re-bid entirely and your security retained by the owner for their trouble. You lose your cash, your reputation is soiled and it all but ensures that you will not be allowed to bid another project for that owner again.
Establishing a NY Surety Line, or a NY Bonding Line can give your NY Construction Company a significant competitive advantage against your competition. Further it allows Best Practice NY Construction firms to better and more efficiently deploy their critical cash resources. We welcome your phone calls, and inquiries as it relates to obtaining or increasing a NY Surety or NY Bonding line . We encourage you to contact a Risk Advisory at Metropolitan Risk Advisory for all of your NY Surety or NY Bonding needs.
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