LAUSD Boot Camp:

Construction Bond Basics

Presented by Patty Zenizo

Preferred Bonding& Insurance Services

September 11, 2013

Agenda

What is a Contract Bond?

How to Apply for a Bond Program

The Pre-Qualification Process

Marketing your Account

Underwriting Criteria per Market

U.S. Small Business Administration

U.S. Small Business Administration Programs

Bond Limits

What is a Contract Bond?

A Contract

Bond is a

3 party

Agreement

between:

1) Surety

2) Contractor

3) Owner

How to Apply for a Bond Program

Find a Qualified Agent/Broker

Complete Application Package

Agent Checks for Accuracy

Respond to Agent Questions

Submit Additional Information Upon Request

The Pre-Qualification Process

The 3 ’s of Bonding:

Capital

Character

Capacity

Marketing Your Account

Financial strength is measured and package is sent to appropriate market:

Standard

Specialty

Sub-standard

Rapid Bonds

Underwriting Criteria per Market

Rapid Bonds.…………………..

Standard………………………..

Specialty………………………..

Sub-Standard…………………..

Excellent Credit, limited bonds

Good Credit, Lines of Credit, Track Record, Surety Experience, CPA Reviewed F/S

Good Credit, Track Record, Transitional Surety Experience, CPA Compiled F/S

Collateral, Will take In-house F/S

U.S. Small Business Administration Bond Guarantee Program

1. Generous to Start-up Firms

2. Promotes Growth

3. Prior Experience Certificate

4. Good Credit/Poor Credit

1. Limits are kept at minimum to avoid claims

2. Promotes growth, at a slower pace

3. Prior Work Experience not Accepted; company track record only

4. Will not underwrite accounts with poor credit history

SBA vs. Surety

U.S. Small Business Administration Bond Guarantee Program

A Single Maximum Bond Limit Of $6,500,000

OR Up To $10,000,000 On Federal Projects (Under Certain Conditions)

Quick Bond Program– Contracts Under $250,000– Liquidated Damages Under $250– No Minimum Credit or Financials Required

Bond Limits

Based on Financial Strength &Quality of Financial Statement:

In-house CPA Compiled/Reviewed

Single Size Limit is based onWorking Capital:

Current Assets - Current Liabilities= Working Capital

Aggregate Limit is Based onWorking Capital and Sales

Contact Information

Patty Zenizo

Phone: 323-663-7814

www.preferredbonding.com