Bonding Industry Gains Interest in Small Contractors
While for the last two to three years it's been difficult for small
contractors to bond jobs, the experts say that the market may be
loosening up, making it a good time for glazing contractors new
to surety bonding to jump into the market.
"The surety industry had some terrible losses for a few years
there up until about two, three years ago," explains E. J.
Kelley, executive vice president and general counsel for Enclos
Corp in Eagan, Minn. "They had a number of prominent contractors
go down and
big corporations had some issues so there were
large losses in the surety industry. And so they significantly tightened
their underwriting standards."
According to Kelly, that's made it tougher for companies without
a long history in business or with weak credit to take on big jobs.
Lynn Schubert, president of the Surety and Fidelity Association
of America in Washington, D.C., agrees.
"The industry has been
what the insurance industry
would call a soft market for quite some time. A lot of people were
getting bonds; just about everybody was getting bonds, and construction
was good-everyone was making money. [Then] people started to lose
money, and that always means the sureties end up paying once contractors
default. And so the market tightened up and they really increased
their underwriting standards again, went back to reviewing all the
basics of 'do you actually have the capital and the capacity to
perform the work.' And so a lot of people who had had bonds were
unable to get bonds for a while," Schubert says.
However, Schubert says that the bonding industry has been profitable
for the last two years, meaning that requirements are beginning
to loosen somewhat.
"They've started to actually make money again," adds
Jim Stathopoulos, chief executive officer of Ajay Glass & Mirror
Co. in Rochester, N.Y. "With that comes typically a little
bit of loosening in the ability to obtain bonds but again, if you
have a financially viable company, and you can show them you've
been financially viable for an extended period of time, they'll
certainly consider you."
However, after a tough couple of years, bonding agents are looking
for more hard data than they may have required several years ago.
"It's actually an interesting phenomenon because it appears
that people are not loosening up to the extent that they did in
the past where they were writing bonds for unqualified people,"
"They won't [consider a company] just based on
own in-house numbers, they're going to want an audited statement,"
Now, instead, bonding agents are diversifying the group of contractors
to which they offer bonds.
"Not everyone is chasing the mid-size contractors anymore,
there are actually people focused on mega-jumbo contractors as well
as small and emerging contractors, and that's really where I see
it loosening up. They're not saying that you don't have to be qualified
but they're more interested in talking to a diverse group of contractors,"
To learn more about the requirements bonding agents are looking
for, and advice for bonding your first job, look for the October
issue of USGlass magazine.
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