Finance & Bonding Relationship - Pt. 2

512 views

Published on

http://www.Cash4Impact.com, Finance & Bonding Relationship Pt. 2, This narrated video presentation continues the discussion regarding the relationship between a construction company's financial statements and the bonding it obtains. info@tocafamilyservices.com, 404-642-0509

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
512
On SlideShare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
5
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • .
  • Finance & Bonding Relationship - Pt. 2

    1. 1. Relationship Between Bonding & Finance Part II What Bonding Companies Seek in a Balance Sheet
    2. 2. Bonding Program Determinants <ul><li>What else determines bonding programs? </li></ul><ul><li>List of jobs on hand. </li></ul><ul><li>The year in perspective. </li></ul><ul><ul><li>Spectrum of jobs performed and anticipated for the year; those from the previous year; contract value of each job; length of each job. </li></ul></ul><ul><ul><ul><li>Does the company average jobs of $200,000-$300,000 but occasionally garner projects of $1.5 million? </li></ul></ul></ul><ul><ul><ul><li>Is there a large job that’s scheduled to commence in a couple of months? </li></ul></ul></ul>www.Cash4Impact.com
    3. 3. Debt Ratio Needs What can you do? <ul><li>Bonding companies seek a 3:1 debt ratio on the balance sheet. </li></ul><ul><li>Whatever you can do to decrease your debt will improve your ratio. </li></ul><ul><ul><li>You, an investor or partner can inject equity capital. </li></ul></ul><ul><ul><li>Pay off a term loan. </li></ul></ul><ul><ul><li>Restructure existing loans. </li></ul></ul><ul><li>Bonding companies can tailor the bonding program to fit the balance sheet. If only some of your projects are bonded, the tailored bonding program may meet your needs. </li></ul>www.Cash4Impact.com
    4. 4. Bonding Options <ul><li>Difficulty in obtaining bonds? </li></ul><ul><li>SBA-guaranteed bonds. </li></ul><ul><ul><li>Similar concept to SBA loans. </li></ul></ul><ul><li>3 rd party indemnities. </li></ul><ul><ul><li>These can be provided by the seller if you are buying another construction company, by an investor, or by a joint venture or other partner. </li></ul></ul>www.Cash4Impact.com
    5. 5. Financial Statements <ul><li>Bonding companies prefer reviewed financials & love audited financials. </li></ul><ul><ul><ul><li>With reviewed financials, the bonding company can be certain that the financials presented to them are accurate and reflective of the company’s true condition. </li></ul></ul></ul><ul><ul><li>For a long-term customer, may take CPA-compiled statements. </li></ul></ul><ul><ul><ul><li>However, when that customer seeks more steady bonding or presents a weaker balance sheet, the bonding company will want reviewed financials. </li></ul></ul></ul>www.Cash4Impact.com
    6. 6. Audited or Reviewed <ul><li>Why audited or reviewed statements? </li></ul><ul><ul><li>With Quickbooks only data, a company’s owner or CFO may add false data, delete information, or manipulate timing to make statements look better. </li></ul></ul><ul><ul><li>CFO, owner, et al may make mistakes with generally accepted accounting principles (GAAP). </li></ul></ul><ul><li>Need credible external source (CPA) reviewing the information. CPAs and their accounting activities are regulated. </li></ul><ul><ul><li>Outright fraud is always illegal but can be difficult to prove unless glaring. </li></ul></ul>www.Cash4Impact.com
    7. 7. Guarantees & Payments <ul><li>Most bonding companies like personal guarantees. </li></ul><ul><li>Or other guarantees to 100% of the bond. </li></ul><ul><li>Remember, bonding is NOT insurance. </li></ul><ul><ul><li>Bonding, less a risk product than a finance product. </li></ul></ul><ul><li>Bonding’s purpose - to ensure the project continues smoothly with minimal hiccups. </li></ul><ul><li>In rare instance bond must pay, bonding company expects full reimbursement of their payouts. </li></ul>www.Cash4Impact.com
    8. 8. Summary <ul><li>In general practice, if the bond company must pay out: </li></ul><ul><li>To the extent that it was their customer’s fault through overt negligence or fraud, the bond company will pursue full repayment. </li></ul><ul><li>To the extent that it was not their customer’s fault AND the customer helps them as much as possible to mitigate the payouts, the bond company will pursue only partial repayment. </li></ul>www.Cash4Impact.com
    9. 9. <ul><li>Additional Information: </li></ul><ul><li>Solving the Capital Equation: </li></ul><ul><li>Financing Solutions for Small Businesses </li></ul><ul><li>Available on Amazon </li></ul>Getting Started
    10. 10. <ul><li>Thank You! </li></ul>Contact Us Tiffany C. Wright Follow my blog, Cash for Impact: http://www.Cash4Impact.com Tiffany C. Wright The Resourceful CEO Toca Family Business Services

    ×