Contractor Frequently Asked Questions: Part 2
Can I get a blanket bond for all my bonding needs?
No. Each bond is tied to a specific contract or obligation; therefore, each contract/obligation must have its own bond.
Why are bonds required?
In 1935 the Miller Act was passed, which requires federal construction contracts over $150,000 to furnish a performance and payment bond. Surety bonds provide the government with prequalification of contractors and as well as remedy should a contractor fail to perform or fail to pay subcontractors and suppliers of a project.
After the Miller Act was passed, states throughout the country saw the benefits surety bonds and began passing “Little Miller Acts”. Each state's Little Miller Act vary in size and requirements; however, they all closely follow the Federal Miller Act.
Why are my financial statements so important?
Financial statements are important because they provide the surety of a sense of where the company stands financially. Larger bonds will require increased levels of preparation, relying on the accountant's verification within the letter to the financials. Financial statements are critical when a principal wants to maximize their bond program as surety is a credit product.
What key items do sureties look for in a financial statement?
The financial statement is prepared to GAAP standards.
Balance sheet
Income statement
Statement of cash flows
Footnotes with any disclosures
Current work on hand details (cost to complete, over/underbilling’s, etc.)
Level of preparation
Have more questions?
Establish a connection with a Parrot Surety Producer.
To gain, improve, or optimize your access to surety credit, give us a squawk at 615-205-5080 or info@ParrotSuretyServices.com