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Communication is Key
Keeping open lines of communication with both banks and surety companies is a very important practice for contractors. Banks, primarily, so they are willing to provide operating capital and to guarantee lines of credit when needed. Surety companies so they are willing to provide surety—guarantees that a business corporation called a “principal” will carry out an obligation to a third party, called an “obligee.” An example of such an obligation includes a contractor constructing a site according to the contract specifications for the owner.
As for banks, one important example of the benefit of open communication is when the contractor needs a bank line of credit. Being open with banks about your business is very important to the ability of contractors to quickly secure those lines of credit.
As for surety, one important example of the benefit of open communication is when the contractor is bidding large, complicated projects which exceed the contractor’s individual project surety line. In these cases, it is important for the contractor to let the surety know what is going on and, essentially, request permission to bid the job.
Open communication will go a long way in emphasizing that the contractor understands that banks and surety companies are stakeholders in the contractor’s business. At Standard, in addition to regular communication with our lead bank and surety provider, we provide them both with an annual report that includes our audited financial statements as well as providing a forecast for the new fiscal year.