July 27, 2015
Becoming an adult I used to be a tall kid, one of several tallest during my class. I used to be taught “not to fight,” so sometimes I came to be a target for (shorter) tough kids who planned to push round the big guy.
Given that we are all adult, I’m glad to convey that’s all behind us… or perhaps is it?
Let’s consider the situation of construction companies. If you’re a contractor, you may feel bullied sometimes, by VENDORS who purport to offer you. One of them could possibly be your banker.
Banking Relations for Construction Companies
Working capital is a financial source of contractors, particularly when setting up a fresh project. That they’ve to work for forty-five days or even more, paying out of pocket for labor and materials before they receive their first money beneath the contract. Bank credit could be a perfect solution because of this.
The modern contract can be an asset to the company, and also the bank can rely on this when lending money. But what comes about when the contractor brings the lending company a bonded project? They are going to don’t lend against that job! Their position could be that the rights of the surety conflict making use of their own.
Bonding Relations for Construction Companies
More bullies: Now let’s look at the surety side. When looking for bonding support, the underwriters ALWAYS inquire about banking relations:
“Do you do have a working capital line?”
“How much of these days it is available?”
“How would it be secured?”
“If you don’t have a financial institution line we wish you to definitely apply for one. It will also help you will get through a problem and prevent a bond claim.”
“The bank line will help you finance a sluggish start additional projects without depleting your money position.”
“If you might be licensed by the bank, it can help assure us that you simply also deserve bonding credit.”
Feel bullied? You must!
Unfortunately that construction companies might need both bank and surety support. As a way to pursue public work (municipal, state, and federal contracts), surety bonds are mandatory.
The bonding company wants you to definitely possess a bank, but the bank does not want to support bonded projects. You can’t win!
The perfect solution is for the contractor to stop “project specific” lending. As opposed to presenting someone contract (asset) towards the bank, they must seek an overall working capital line that can be used in their discretion on any new contract.
That’s how we test the limits about the bullies. If only I had created known!
July 27, 2015