Surety companies are not fond of surprises when it comes to a business’s financial situation. To help maintain good surety credit, it is important to communicate the following changes to your professional surety agent as soon as they occur, so your surety agent can then work with your surety underwriter on behalf of your business.
- Change In Ownership
Ownership changes may affect the indemnification supplied to the surety company. This includes stock repurchases and ESOPs.
- Change in CPA
Your surety company will want to understand the reason for this change.
- New Business Ventures
Could this affect the working capital of your business? Will cash flow be provided to the new venture?
- Change in Banking Relationship
Your surety company will want to know the reason for the change. Has the security to support the bank line changed? Did the bank covenants change?
- Large Increase in Bank Debt
What is the cause of the increase in debt? Is it related to cash flow issues? Is it due to an uncollectible receivable?
- Major Capital Expenditures
How will this impact the cash flow and the debt to equity position? What is the purpose and necessity of the purchases?
- Borrowings Related to Companies and/or Owners
Your business should not be the bank for related entities. Loans can negatively impact the working capital for the bond program needed.
As with anything else, communication is key. Timely communication with your surety agent about any changes is imperative. This allows your surety agent to best translate your business plan to the surety company.
For more information on our unique bond solutions, please contact a member of our Surety Team:
Surety Bond Executive