HOW TAXES AFFECT LINKS
When contractors pursue bidding and compliance bonds, there is a submission process through which a set of underwriting information is developed.
Many applicants compare the process to applying for a bank loan. The irony is that the process is in fact similar, and surety companies view bond issuance as granting collateral credit.
It could be assumed that the banker will need financial statements and tax returns. They also know that lenders will review Dun and Bradstreet’s personal credit reports and a business report. This line of thinking can prepare the contractor for the questioning process associated with bonding.
There are many factors that contribute to bond underwriting decisions. Contractor history is considered along with credit and financial analysis, estimation, project management, equipment, a variety of items.
For many contractors, the process of searching for surety bonds is mysterious and frustrating. Not having them can prevent the company from graduating to bigger projects and greater financial success. Seminar attendees often ask us for the miracle solution. “What should I do to join?” So, now we reveal what, for many, will be the key to qualifying for the offer and fulfillment bonuses:
Pay more taxes!
Sounds crazy? Often times, business managers struggle to manage (reduce) tax payments. They feel that a low bill (or no tax bill) is proof of a successful financial strategy. So why paying more taxes can help the business qualify for the bonds?
Surety underwriters intend to issue bonds for successful companies that are likely to be successful in their tied contracts. What better sign of success than having made a profit the previous year? Profits demonstrate the vitality of the company. They show that the managemen Section Bonds of the company acquired enough work, with sufficient margin and controlled expenses, resulting in a net profit. The point is, you only have taxes if the year was successful and the business made money. Proceeds strengthen the foundation of the company ensuring continued support from shareholders and creditors. Earnings and growth are elements that, combined with other relevant factors, generate trust on the part of subscribers. That’s when the bonds are issued!
Paying taxes is an important part of the bond not because taxes are beneficial; It’s because paying taxes is indicative of good record keeping, profitability, cash flow, and growth, all of which are good for the business and the collateral behind it.
Steve Golia is an experienced provider of bidding and compliance bonds for contractors. For more than 30 years he has specialized in solving bail bond problems for contractors and helping them when others failed.
Steve Golia brings underwriting talent and market access to his clients. This is combined with spectacular service and great accessibility.