Imagine this: your firm just landed its biggest contract; everyone is ready to get out there and begin working, you just need to secure working capital to help you cover the additional payroll and material expenses. Then you find out that a surety bond is being required by the owner. This makes it seemingly impossible to receive funding and begin the job that will grow your business. Do not fret; there is a solution to your problem! With the help of the right partner, you can get access to the working capital your business needs even for bonded work.
Lets start with the definition of a bond as it pertains to the construction industry: A type of surety bond used by the owners or General Contractor in construction projects to protect against an adverse event that causes disruptions, failure to complete the project due to insolvency of the contractors or subcontractors, or the job’s failure to meet contract specifications.
Access to capital on bonded work is usually divided into two categories. Are you the bonded company or is the general contractor bonded? If your firm is the bonded company, it can be tough to acquire capital, as the bonding company’s rights to the receivables from the Owner or General Contractor supersedes the rights of the lender. Although it may be difficult, there are companies that specialize in financing for the construction industry, such as CapitalPlus Equity. These experienced companies have the expertise in the construction industry to help a bonded firm acquire the working capital they need to take on new and larger contracts.
BUT if your general contractor is the one that is bonded, it is much easier to receive funding. This is because the payments from the bonded GC are basically insured from the bonding company. In this scenario, it works in your favor and makes it easier to increase your cash flow and begin new jobs.
In short, it makes it easier for you to get funding when your GC is bonded than it is if your company is bonded. It is much riskier for lenders to fund bonded companies. However, all hope is not lost when you find partners with the experience and expertise in financing for the construction industry to help you navigate these issues. Without access to capital, it makes it much harder for new and smaller construction companies to bid on and win more and larger jobs due to lack of cash flow. If your firm works on bonded jobs, consider partnering with a company that specializes in the construction industry, such as CapitalPlus Equity, who can help you get the working capital you need to expand your growing business.Back to blog