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LAUSD Boot Camp:
Construction Bond Basics
Presented by Patty Zenizo
Preferred Bonding& Insurance Services
September 11, 2013
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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
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What is a Contract Bond?
A Contract
Bond is a
3 party
Agreement
between:
1) Surety
2) Contractor
3) Owner
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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
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The Pre-Qualification Process
The 3 ’s of Bonding:
Capital
Character
Capacity
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Marketing Your Account
Financial strength is measured and package is sent to appropriate market:
Standard
Specialty
Sub-standard
Rapid Bonds
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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
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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
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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
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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
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Contact Information
Patty Zenizo
Phone: 323-663-7814
www.preferredbonding.com