An Invaluable Partnership: How NASBP Bond Producers Help Ensure Success and Growth for Small Contractors
This is the first in a three-part series on how NASBP bond producers are uniquely situated to ensure success and growth for small contractors.
For small contractors looking to build a solid foundation for business growth, a strong understanding of the contract surety bond process is essential.
Though the process of obtaining a bond may be new to a contractor that only performs private work, NASBP bond producers are uniquely qualified to help entrepreneurs and small business owners understand the bond process and increase their financial literacy to ensure their success.
David Castillo, Senior Vice President at Marsh and Chair of the NASBP Small and Emerging Business Committee has been working with small contractors for most of his 35-year career. “It's one of the things I care about most, because I think you can be more of a partner to them,” he said. “You can really help the smaller contractor grow.”
Castillo said finding the right partnership is crucial for contractors. “The first thing you have to do is find an agency that is committed to and understands bonding, because if you don't, you're going to have problems. You also need to find a construction-oriented CPA and banker,” he said. “What I've always done for my clients is help them understand the process from a financial statement standpoint in terms of what kind of financial statement they are going to need for the type of work they are going to be doing.”
A long-time NASBP member, Castillo has taught at the NASBP William J. Angell Surety School since 2001. He’s also spent time visiting small contractor groups, providing bond education seminars across the country, and educating them on the bonding process. “What I always tell them is this—what they have to understand is the surety industry has different language than they are used to,” he said. “Learn the language by finding a broker that helps you understand it, and things will be a lot better for you. The good surety brokers are always going to be by your side.”
Josh Etemadi, Chair of NASBP Automation & Technology Committee, is currently Assistant Vice President of Construction Bonds, Inc., a division of Murray Securus. Since 2007, he has focused primarily on small and emerging contractors. “Our specialty is education, training, and providing them knowledge of what the surety is looking for to qualify for bonding,” Etemadi said.
Etemadi, who has been an NASBP member since May 2007, said that often the only financial advice small contractors have received comes from their tax accountant. “There are things that the surety companies want to see differently than a tax accountant,” he said. “So we're going in there saying, hey, if you want to get a $2M bond, here's what’s going to be expected of you to qualify for that. We're giving them the coaching from the outset, connecting them with a good construction CPA, a good lawyer, a good banker, a good insurance agent, obviously a good bond agent—we’re building a circle of trust.”
Castillo shared similar sentiments. “I've seen what works for small contractors and what does not, and for most of the ones who have made it, it’s had to do with not cutting corners, and their tenacity and passion for growing their business,” he said. “But it also has to do with the choice of advisors that they rely on day-to-day so they can build their business—their surety broker, their CPA, their banker, their attorney, their insurance broker. From a bonding standpoint, we help businesses grow; from an insurance perspective, we protect their assets.”
Etemadi often helps small and emerging contractors find solutions through programs offered by the U.S. Small Business Administration. “A lot of people don't realize there's a SBA Bond Guarantee Program available for small or emerging contractors,” he said. “What's great about that program is that if the credit isn't perfect or they don't have the best financials, the SBA can still help. The SBA will give us that guarantee to help the surety feel a bit more comfortable with the risk, because there's a potential 90% guarantee from the SBA reflecting that ‘if this contractor fails we, the SBA, will pick up the slack.’”
Castillo and others at NASBP have worked hard through the years to develop the educational resources for contractors available through SuretyLearn.org. On the site, NASBP has compiled materials to help small and emerging contractors familiarize themselves with surety industry topics, terms, and practice.
“We spent a lot of time developing SuretyLearn.org–there is a wealth of information about bond programs with the SBA,” Castillo said. “There’s even an article called ‘Answers to 51 Questions Small Contractors Ask About Bonding.’ I think one of the best things NASBP has ever done was put together the website SuretyLearn.org.”
Etemadi stressed the value of financial literacy for small contractors. “The ones who have a good handle of their finances and know what's going on are going to be a lot more successful,” he said.
This is part one in a series of three NASBP blogs.
Read the second NASBP Blog on this topic.
Read the third NASBP Blog on this topic.
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