Strengthen Your Surety Credit: 3 Economic Trends Specialty Trade Contractors Can Leverage
Specialty trade contractors seeking to strengthen their case for surety credit can tap into favorable economic trends that enhance their financial standing. By aligning their business strategy to specific trends, they can improve their chances of securing, maintaining, or growing the surety credit they need to succeed.
Increased Infrastructure Investment
Infrastructure projects present a tremendous opportunity for specialty trade contractors. These projects often come with a stable, long-term pipeline of work that boosts financial stability. Due to their high-value and essential nature, infrastructure projects are seen as low-risk by sureties. Plus, government-backed contracts often include predictable payment schedules, further reducing financial risk.
Specialty trade contractors with a steady flow of infrastructure work can demonstrate consistent revenue, making them more attractive to surety underwriters who prioritize financial stability.
Key Takeaways:
- Stable pipeline: Infrastructure projects provide long-term work opportunities.
- Government backing: Predictable payments reduce financial risk.
- Surety benefit: These factors improve standing with surety underwriters.
Low Interest Rates and Accessible Capital
Low interest rate environments create favorable conditions for contractors to access affordable capital, which can be used to strengthen cash flow, acquire new equipment, or expand capacity. Sureties look closely at a contractor’s working capital, net worth, and debt management. Maintaining liquidity and minimizing debt can enhance their financial profile, making them a more favorable candidate for surety credit.
Leveraging low interest rates to improve working capital and keep debt ratios low helps demonstrate financial health, a key factor in surety underwriting.
Key Takeaways:
- Affordable capital: Take advantage of low interest rates to finance growth.
- Improved financial profile: Strong liquidity and low debt ratios are important to surety approval.
- Surety benefit: A healthy financial outlook increases surety confidence.
Rising Demand for Sustainability and Green Building
Sustainable and green building projects are in high demand, offering a niche market for specialty trade contractors. These projects tend to focus on innovation and quality over cost, making them less price-sensitive. Additionally, companies and owners backing these projects are often committed to long-term investments, which sureties view as a lower risk.
Contractors who lead in sustainability and green construction can differentiate themselves in the market, positioning their business for growth. Sureties may favor contractors working on high-profile, cutting-edge projects as they indicate a stable, forward-thinking business model.
Key Takeaways:
- Market differentiation: Focus on sustainable projects to stand out.
- Long-term investment: Green projects backed by committed owners offer financial stability.
- Surety benefit: Sureties may prioritize low-risk, high-profile projects with long-term value.
By aligning their business strategies with favorable economic trends, contractors can present a stronger financial profile to surety underwriters. Whether it’s showcasing consistent infrastructure work, maintaining liquidity through accessible capital, or demonstrating leadership in green building, specialty trade contractors should look to leverage current economic conditions, when possible, to enhance their surety creditworthiness.
How do I get a Surety Bond?
Surety bonds are issued by Merchants Bonding Company (Mutual) through insurance agents. Contact your local insurance agent or use our Find an Agent tool. They will guide you through the process, informing you of what documents and information are needed by the surety (Merchants Bonding Company (Mutual)) to underwrite your bond.
What is a Surety Bond?
A surety bond is a three-party agreement that ensures the fulfillment of a commitment or contract. For instance, the surety (Merchants Bonding Company (Mutual)) may provide a surety bond to a construction company (the principal) which is required by the state (the obligee), ensuring the construction company will perform the duties as outlined in the contract. In bonding the construction company, Merchants assumes the risk should the company default or not fulfill their contract. A surety bond is different from traditional insurance in that the principal is obligated to pay back the surety company on any claims paid out.
All information provided is subject to change.