While the construction industry is rapidly expanding, there has also been an increase in projects that are managed by larger general contractors. In these cases, the general contractors will need to manage a growing number of subcontractors.
In order to keep pace with demand, general contractors will also need to cast a wider net to bring in more subcontractors with the right skills to get the job done.
As an agent, you may be presented with opportunities to connect your contractor clients with general contractors. This can provide opportunities for growth for your contractor clients. At the same time, the general contractors will want to manage the risks associated with partnering with these subcontractors.
If your clients are interested in taking advantage of these opportunities it’s important to keep the following issues in mind.
Bonding in the Non-Standard Market
In order to keep pace with demand, general contractors need to recruit skilled contractors.
However, if these contractors lack a bonding history or have credit or financial issues it may be harder for them to get bonded.
In these cases, working with a surety bond provider who understands the non-standard market may be necessary to bond these clients for the first time. It’s also a good idea to work with a bonding company that understands the complexity of the insurance market and can assess the right bonding limits for each subcontractor.
Larger general contractors may not require that their subcontractors get bonded individually. Instead, the general contractor may be able to bond their contractors using Subguard© or another type of Subcontractor Default Insurance (SDI).
However, Subguard© insurance doesn’t protect the general contractor if the subcontractors are unable to effectively manage their finances.
In this case, partnering your clients with an experienced project accounting team can help them to avoid liens, liquidated damages and other issues that can affect their ability to get the job done.
For many general contractors, their subcontractor’s cash flow issues impact the success of a project. In the event that payment from a project owner is delayed or project funds aren’t effectively managed, subcontractors could be delayed by late payment for materials or delayed payroll for their team.
This in turn can affect the entire project and jeopardize the subcontractor’s relationship with the general contractor.
In order to avoid this issue, working with a company that can provide Requisition Cash Advances can help your clients to pay their team members and cover the cost of materials. This allows them to stay on track and get the job done.
Even with the best of planning and the best intentions, things can go wrong on every project. When that happens, the way that claims are managed can mean the difference between defaulting on a bond and successfully taking a project across the finish line.
In this case, working with an experienced claims manager can help to facilitate communication between subcontractors, project owners, and general contractors. This helps your clients to avoid problems that can hurt their bottom line, and allows them to take projects across the finish line.
When it Comes to Risk Management Cinium Can Help
Because of Cinium’s experience bonding contractors who are turned away by other surety providers, we can often get your subcontractors the bonds they need to get the job done.
We assess this risk by having our team of experienced construction professionals perform a thorough review of the contract, plans and specs, and contractor’s proposal. In addition, we contact the general contractor/owner to obtain the schedule start and finish dates and liquidated damages amounts, if any.
By applying our Project Accounting Services, we take responsibility for a subcontractor’s project funds and make sure that every project dollar is accounted for. This helps subcontractors to stay focused on the task at hand and provides general contractors with peace of mind, knowing that their project funds are being used appropriately.
As an added bonus, subcontractors can take advantage of Project Accounting Services, even if they are covered by Subguard© Insurance and don’t need a bond from Cinium.
In the event that issues emerge, we can also assist with claims management. Because we know the construction industry, we can facilitate communication between subcontractors, general contractors, and project owners. This allows all parties to find a solution that allows your clients to avoid defaulting on their bonds.
Looking to take advantage of Cinium’s Contractor Credit Program? Schedule a free consultation today, or call (855) 4-CINIUM.