What should contractors be looking for in their surety bond broker?
Author: Mathew Manol
As a contractor operating in any of the various construction spaces (whether commercial, residential, industrial, institutional or otherwise), choosing trusted partners throughout the entire construction pyramid is essential to your business’ success.
When considering who a contractor’s key partners are, we often contemplate their sub-trades, suppliers or customers. But what about their surety bond broker? This key individual can be the difference between obtaining bond support for that lucrative new project, or watching it pass you by.
The decision can be overwhelming, as many offers for representation are presented to you. Let us simplify the process for you! When you are contemplating the fit of a construction bond broker for your business – FCA believes in TRUST:
T – Transparency, Honesty and Fairness
Perhaps implied by the choice of acronym – transparency, honesty and fairness are the foundation of any strong relationship, this one being no different. Your surety bond broker will be reviewing your financial documents, representing your business in discussions with insurers and being given critical information as it pertains to your short and long-term business goals. This person needs to be someone that you know will provide you with the same level of care that you provide to your clients.
R – Recognition of your business’ strengths and goals
No company is created equal and your business is unique. A strong construction surety broker will identify what makes your business special and leverage that when presenting your information to potential insurers. Part in parcel with a deep understanding of your business from both a cultural and operational perspective is a recognition of where you want to take your business. To be the trusted advisor that strong surety bond brokers strive to be, they must understand where your business goals lie.
U – Understanding of the surety product
Like your business, surety bonds are a unique product that not all insurance brokers will have expertise with. While typically underwritten and sold by insurance companies, construction surety bonds, most commonly referred to as Performance Bonds and Labour & Material Payment Bonds are credit products. Surety bond brokers require the ability to interpret financial statements, negotiate the terms of bond issuance and act as an advisor if disputes occur.
When a large lucrative contract falls in your lap, or a potential bad debt threatens your short-term liquidity – you want a seasoned surety professional to help manage this process with your insurer. You are an expert in your field, you deserve the support of an expert in the surety bond space.
S – Service Levels
Tenders have closings dates, contract award letters stipulate timelines and construction schedules certainly have deadlines! The construction world requires promptness and diligence. The last thing a contractor needs to worry about is the ability of their surety bond broker to adequately provide them support on a timely basis. Maintaining high service levels also means being pro-active. Actively seeking more favorable terms for a contractor, as well as understanding the questions an insurer may ask on a specific request and mitigating “back and forth” by handling them in the first conversation are examples of being pro-active.
T – Teamwork (can they grow YOUR team?)
Particularly in 2022, the discussions around labor shortages are plentiful. While contractors are busy with a heavy focus on ensuring they are well staffed with skilled and capable employees, referrals and recommendations for their third-party partners can go a long way. A strong surety bond broker is well connected with accountants, lawyers, bankers and construction software providers (and more!). As a construction surety broker, it is important to provide value to your clients’ business. By building connections and partnerships with these other core partners, a surety broker can work cohesively with these individuals to ensure decisions made in relation to your bonding do not negatively affect other areas of your business.
An old saying in the surety bond world is that “bonding companies do not like surprises”, said typically in relation to the financial results of their clients. That being said, after many years of speaking with contractors across Canada, the same holds true for them. An unexpected declination or a deviation from expected terms of support can be an unnerving prospect for many contractors. The best way to avoid the aforementioned and other negative surprises, is to be represented by a surety bond savvy broker that you can TRUST.
Wishing everyone a happy and healthy 2022!