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Growing up I was a tall kid, one of the tallest in my class. I was taught “don’t get into fights,” so sometimes I became a target for shorter, older kids who wanted to push around a big guy.
Now that we’re all grown up, I’m glad to say that’s all behind us… or is it?
If you are a contractor, you may feel bullied sometimes, by VENDORS who purport to serve you. One of them could be your banker.
Banking Relations for Construction Companies
Working capital is important for contractors, especially when starting up a new project. They may have to work for 45 days or more paying for labor and materials before they receive their first payment under the contract. Bank credit can be a perfect solution for this.
A new contract is an asset for the company, and the bank can rely on this when lending money. But what happens when the contractor brings the bank a bonded project? They will refuse to lend against that job! Their position is that the rights of the surety conflict with their own.
Bonding Relations for Construction Companies
More bullies: Now look at the surety side. When applying for bonding support, the underwriters ALWAYS ask about banking relations:
- “Do you have a working capital line?”
- “How much of it is currently available?”
- “We want you to have a bank line. It can help you get through a problem and prevent a bond claim.”
- “If you are approved by the bank, it helps assure us that you also deserve bonding credit.”
Feel bullied? You should!
The reality is that construction companies may need both bank and surety support. In order to pursue public work (municipalities, state and federal contracts), surety bonds are mandatory.
The surety wants you to have a bank, but the bank doesn’t want to support bonded projects. You can’t win!
The solution is for the contractor to avoid “project specific” lending and seek a general working capital line that can be used at their discretion on any new contract.
That’s how to push back on bullies.
I wish I had known!
Bonding Pros: We understand the importance of banking and bonding. These relationships are critical for contractors. For companies that do not have a banking relationship, we can still arrange for bonding capacity and then help position the account for banking in the future!
We have the strong relationships that enable your deals to get done. Call us when you need a bid, performance, site or subdivision bond. We have the markets and the relationships that matter on tough cases. 856-304-7348
Book a time to speak with us: Click!