Volume 38, Issue 2, February 2003


Ensuring Surety Bonding Becomes More Difficult
Glazing contractors have always been faced with numerous challenges such as finding and keeping good employees and getting paid on time. Access to surety bonding is becoming more of a challenging issue. 

For various reasons, bonding companies, or surety agents, have become more stringent when it comes to bonding for glaziers.

“Bonding companies have taken a big hit over the past two years, and in the late 1990s they were writing bonds to some companies that probably had no business being bonded,” said Andy Gum from Thomas Glass Co. in Columbus, Ohio. “Sureties also take out their own policies (reinsurance) and the cost of that has gone up. Underwriting has also tightened up and on top of all that glazing contractors have had a rough year.”

Mac Leavitt, a surety agent with Berwanger Overmyer Associates, agrees.

“Gaining surety is becoming an issue because sureties have incurred lots of losses and they’ve tightened up underwriting and their pricing,” said Leavitt. 

When the time comes for a glazier to ensure a job is bonded, the company’s history can be a make-it or break-it factor. Sureties will look at such factors as how long the company has been in business, financials and the size of a job. When looking at the job’s size, a surety wants to know if it is one the glazier can handle. For example, could a glazier that’s never worked on a project worth more than $1 million handle a $2 million project he wants to bid? 

“[Sureties] want to know more about you because they are bearing the risk,” said Gum.

However, there are actions glazing contractors can take to ensure a project is bonded (see sidebar below).

Surety Bonding Dos and Don’ts

• Have a CPA review your quality fiscal year end statement on a percentage of completion basis;
• Have positive working capital and net worth;
• Have a debt-to-worth ratio of no more than three to one;
• Have a bank line of credit in place;
• Have a good credit history;
• Meet with your surety on a regular basis;
• Have a business plan; and
• Have a continuity plan.

• Have your financial statement prepared on a cash basis;
• Have negative working capital or net worth;
• Have a large debt-to-net worth ratio;
• Have heavy underbillings;
• Have little cash and large bank debt;
• Have a large amount of account receivables over 90 days; and
• Have a poor credit history.

“A glazing contractor needs a certified public accountant with considerable knowledge of the construction business, a banker with considerable knowledge of the construction business and an attorney and insurance agent with knowledge of the construction business,” said Leavitt. “Glaziers also need a clean balance sheet, little debt and lots of cash.” 

Leavitt added that it’s also important for glaziers to keep their surety agents informed regarding what’s happening with their business. “[Sureties] don’t like surprises,” he said. 


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