New Company Needing Bond

[joynerelectric]

We are an electrical contractor, only been in buisness for just over a year. We are looking for a $200,000 bond. This is difficult I am finding out since we do not have any substancial financial statements. It is a single owner buisness and the owners credit is not the greatest. Although he is working at top speed to clean it up. He has recently paid off ALL bad debt. Any help and information is appriciated. Thank You

[Admin]

You must keep in mind that surety bonds are a form of credit. There are no high risk programs for performance bonds. Therefore, you must get the owner's credit in good standing w/ a minimum score of 660. Bonding companies will also require your business financials for performance bonds over $100K. Therefore, you should be able to produce a professional looking and accurate balance sheet & Profit/Loss statement. If you are thinking of doing larger jobs or multiple jobs of this size simutaneously, you should approach a CPA for financials done on an accrual basis.

[joynerelectric]

Thank you for that information. If we can prove that all bad credit has been cleared up can we show this and still be bondable? This will be our first big job, that should start in May of this year. I just find it difficult to believe that something that is guarenteeing your caractor (that you will complete the job) can be based so much on your credit score.
Are there any options for someone in our situation? We are good people looking to do a good job.

[Admin]

You won't have to "prove" anything in regards to your credit (unless there is an error on the credit report). The bonding company will use a credit report to assist them in their underwriting.

If you are new to suretyship, it may seem odd to have approvals based so heavily on credit reports. However, keep in mind that they are a form of credit and a credit report gives detailed information on your past financial payment history. It is one of the easiest ways for a surety to determine one's character and level of financial responsibility.

If you have credit issues, there are alternatives. However, they are a bad choice in comparison to standard suretyship. Some bonding companies will write you with a collateral requirement (something we do not do). Some obligees will allow you to post a letter of credit rather than a bond (which unnecessarily ties up capital).

[joynerelectric]

Ok, then I appriciate your information at least you didn't tell me that there is no chance at all. The Credit Bureu is one of my soap box issues though, they are quick to report bad, but they fail to look at life changes like age, we all make foolish mistakes when we are young, then you decide to grow up and take responsibility for those actions. It still takes 7 more years to be forgiven and until then, in some cases you are treated like you are less than worthy. The owner of our company and myself are in our early thirties, our parents never taught us just how important our credit was going to be.
Thank you again.

[Admin]

I understand your predicament, and it is unfortunately an all too common scenario. Your best bet is to continue to pay your bills on time and wait for the score to rise. If you have major problems, you may want to contact a credit repair agency.

[joynerelectric]

We have already resolved all of his dept issues, but as you know it will continue to show as bad history for 5 to 7 years.

[Admin]

If you do not qualify due to credit issues, you may want to seek professional credit repair help. I am amazed at times what those services are able to accomplish. Obviously if you have a bankruptcy within 7 years, they will not be able to do much.