Bonds

With the introduction of a paperless electronic system, Performance Surety Bonds has mastered the fast and efficient surety bond service. By providing both licenses and permits, Viking Bond Service Company in conjunction with Performance Surety Bonds is ready for any customer whether they are an insurance company, contractor or more. A surety bond, a three party guarantee between the surety company, an oblige and the principal allows someone to obtain a license, permit or to satisfy a release of a lien or a court requirement.

Whatever it is, VBS provides court bonds for guardianship and probate bonds as well as performance bonds for contractors. Additional services including fidelity bonds for commercial crime policies are available as well. By working with small businesses, attorneys, the general public, contractors and P&C insurance agents, Performance Surety Bonds ensures a fast and efficient service. Their service is personable and is provided through a personal agent or directly through them with their fast paperless and new system.

This paperless processing system is revolutionary in that it provides a better way to track and process surety and performance bonds. This electronic method allows these bonds to be processed within a day (or less). This not only speeds up the process, but keeps customers happy and coming back time and time again. This system also allows them to keep their files organized and up-to-date. Thus, a client can contact them with specific questions regarding their file and the agent can assist them immediately because of this new system. All agents are provided direct access to all copies of documents and records for each particular client.

A bonding agency such as Performance Surety Bonds works with a variety of different companies, businesses and individuals. This system allows them to provide the best service possible as well as increase efficiency while doing so. Managing bonds as well as providing expert knowledge on warranty bonds, reclamation bonds, maintenance bonds, payment bonds and contractor bonds are all additional features that Performance Surety Bonds can provide you too. This evaluation of risk will allow an estimation of terms to be created immediately and to process your bonds fast. This expedition makes Performance Surety Bonds a treasure within their industry.

For more information on surety bonds or any other bonds, contact Viking Bond Service at 1-888-2-SURETY or visit their official website with various information at Performancesuretybonds.com.

About Performance Surety Bonds/VBS Bonds: Performance surety bonds is a nationally-licensed agency that provides performance bonds (for contractors) and court bonds (such as guardianship, probate bonds and release of lien). They also handle surety bonds (for licenses and permits), commercial crime policies or fidelity bonds.

This month, the finance article will take a different perspective. We will focus on bonding and how it affects financing. Next month we will discuss the impact of bonding and its requirements on an acquisition.

Bonding is NOT insurance. The purpose of bonding is to ensure that the project continues on or near schedule despite issues with performance or payment. The bond is there to provide assurance to the owner or general contractor that your company can and will fulfill its obligations as contracted. In the event that the bond is utilized, the bonding company expects full repayment for the amount utilized.

Bond companies need 10% equity (or higher) on the balance sheet. In order to show this, a company must retain a portion of its earnings each year. This retention is shown in the Stockholder’s Equity section of the balance sheet. If your firm has not previously retained earnings due to past losses or large shareholder distributions, one way to shore up the balance sheet is to inject your company with equity capital. This injection will show under Contributed Capital in this section. If you’ve made a Shareholder’s Loan to the company, you can quickly shore up your balance sheet by converting that loan to equity. Check with your accountant and attorney to make sure you document the conversion properly.

Bond companies also like to see 5-10% of the revenues in a line of credit (LOC) for a program. That way if you encounter a hiccup – cost overruns, slow payment by the owner or general contractor, disputed work – the surety can be assured that you have access to funding above and beyond your operational cash flow. This LOC will help you complete the work as contracted, thus reducing the risk that any use of the bond will be necessary.

It can get a little tricky here. Banks and other financial institutions will not provide an LOC against “bonded receivables”. Bonded receivables are those accounts receivables that are generated from contracts that required bonds. Why won’t banks lend against these? Because banks place liens on accounts receivables as collateral for the LOC and in doing so mandate that they are in the first position to obtain these receivables in the event of a default. However, with “bonded receivables” the bond company is in the first position. How do construction companies get around this? Most companies do not have 100% bonded contracts so those non-bonded receivables make good collateral. In addition, companies may utilize equipment, property, or other collateral or strong personal guarantees by its management to obtain or increase its LOC.

Many of you understand what a “bonding program” is but some don’t fully understand precisely how it works. Following are two examples to best illustrate what bonding agents mean when they discuss a “program”.

Example 1: Company A has $12 million in annual sales and that revenue is generated from two large $6 million projects. Project 1 yields $6 million for the January – June period and Project 2 yields $6 million for the July – December period.  Assuming that both jobs/projects are fully bonded, this equates to a $6 million bond program. (This $6 million is the per project maximum bonding capacity.)

Example 2: Company B also makes $12 million in annual sales. However, that revenue is generated from a number of small jobs with an average size of $150,000 – $300,000. In any given month projects are beginning and ending, with the overwhelming majority of jobs lasting only 3-4 weeks. The average monthly revenue from these jobs is $1 million. Assuming all jobs are fully bonded, this equates to a $1 million bond program. (This $1 million is the per project maximum bonding capacity.)

A complete program is typically denoted as “per project maximum” over “aggregate bonding” program. I.e., a “2 over 4 program” would be as follows: per project maximum of $2 million; aggregate bonding of $4 million. Aggregate bonding refers to the maximum amount in total outstanding bonds the company can have. Remember that, as a project is completed the exposure decreases and accordingly, the bonding required for that project decreases.

Other things bonding companies look at to determine the bonding program are the list of jobs on hand and the year in perspective. Does the company average jobs of $200,000-$300,000 but occasionally garner projects of $1.5 million? Is there a large job that’s scheduled to commence in a couple of months? Assuming the larger projects are also fully bonded, the bonding program should reflect this pattern otherwise the construction company would have insufficient bonding capacity on a per project basis to cover the larger projects. Consequently, bonding agents look at the spectrum of jobs performed and anticipated for the year and those from the previous year, the contract value of each job, and the length of each job.

Bonding companies seek a 3:1 debt ratio on the balance sheet. Therefore, whatever you can do to decrease your debt will improve your ratio. As stated previously, you or an investor or partner can inject equity capital. You can pay off a term loan. You can restructure existing loans. However, bonding companies can tailor the bonding program to fit the balance sheet. If all your jobs are fully bonded, this could pose a problem. If only some of your projects are bonded, the tailored bonding program may meet your needs.

In addition to SBA-guaranteed bonds, another way for up and coming companies who have had difficulty procuring bonding to obtain some bonding capacity is through 3rd party indemnities. These can be provided by the seller if you are buying a company, by an investor, or by a joint venture or other partner.

Bonding companies strongly prefer reviewed financials. Of course, if they can get audited financials, that is the strongest preference but bonding companies understand that the cost difference between audited and reviewed financials is significant – often several thousand dollars. For a long-term customer, bonding companies may take CPA-compiled statements. However, when that customer seeks more steady bonding or presents a weaker balance sheet, the bonding company will want to switch to reviewed financials. With reviewed financials, the bonding company can be certain that the financials presented to them are accurate and reflective of the company’s true condition. Why audited or reviewed? With Quickbooks only data, a company’s owner or CFO may add false data, delete information, or manipulate timing to make their statements look better. Or they may simply make mistakes due to unfamiliarity with generally accepted accounting principles (GAAP). With no credible outside source (CPA) reviewing the information, the bonding company cannot be certain. CPAs and their accounting activities are regulated. Private company owners and CFOs are not. (Of course, outright fraud is always illegal but can be difficult to prove unless glaring.)

Most bonding companies like personal guarantees or other guarantees to 100% of the bond. Remember, bonding is NOT insurance. Bonding, unlike insurance, is not a risk product. Bonding’s purpose is to ensure that the project continues with minimal hiccups as smoothly as possible. In the rare instance that the bond is called upon to pay, the bonding company expects full reimbursement of their payouts, up to the bond limit. In general practice, if the bond company must pay out, to the extent that it was their customer’s fault through overt negligence or fraud, the bond company will pursue full repayment. To the extent that it was not their customer’s fault AND the customer helps them as much as possible to mitigate the payouts, the bond company will pursue only partial repayment.

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In general, corporations have to offer higher coupon rates to sell their bonds. Maturity date range from 1 year to more than 30 years, with higher coupon rates being associated with longer periods to maturity, to compensate for increased risk. Long-term bonds tend to rise and fall in price more dramatically than do short term bonds; these bonds are more susceptible to movements in interest rates.

In the majority of the markets, it is observed that bonds move in the opposite direction of stocks. If stock prices are up, bond prices witness a downturn and if stock prices are down, bond prices are generally on an upsurge.

Bonds have a purchase price, a sale price, and also an interest rate. If you purchase one, you (as the bondholder) are entitled to payment of the principal when the bond matures, as well as interest payments twice a year.

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Surety bonds generally establish a temporary tripartite relationship between the obligee (the secured party), the obligor (the principal) and the surety (the party that is secondarily liable). Surety ships basically require the surety to undertake the debt of another party (the principal).

Depending on what type of bond you are investing in, could make you earn a lot. There are varieties of bonds available in the market such as Mortgage Broker Bonds, Surety Bonds, etc. Short term low return bonds are a safer way of investing your hard earned money, Companies and Government Issue bonds to meet their day to day operation. When you are investing in a bond, you are loaning your money for an assured period of time to the issuer. In return the bond holder will pay you interest on your investment.

Corporate Bonds-Corporate giants float corporate bonds. However, these bonds carry a risk factor no matter how big the corporate house is.

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You should consider investing in bonds for both income and stability. In any given year equity markets could appreciate in value by 30 to 40 percent or decline in value by the same amount. Bonds fluctuate far less. Bonds also pay interest regularly and thus investors will receive a cheque each month or quarter.

Convertible bonds give the holder the right to “convert” or exchange the par amount of the bond for common shares of the issuer at some fixed ratio during a particular period. Corporate bonds are bonds that an individual invests after analyzing a company’s performance in terms of profitability and its sustainability in the market.

This isn’t had to understand. If you’re holding a bond that was issued that pays at an interest rate of 7%, and cash deposits drop to a return of 6%, then naturally your bond will be worth more and its price will rise.

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The two main categories of surety bonds available today are: contract surety bonds (provide financial security and construction assurance on construction projects by guaranteeing to the obligee that the principal will perform the work and pay subcontractors, workers and suppliers) and commercial surety bonds (guarantee performance by the principal of the obligation stipulated in the bond). These two main categories can be further separated in a wide range of subcategories.

Government bonds are other wise known as “sovereign” debt. Government bonds are rated high then companies bond, this is simply government are trusted more, and they default on less than companies. You may buy bonds (gilts) through post office and stockbroker also.

The new policy measures have created a favorable climate for investors who are eager to save money by investing in bonds. Usually floated by big corporate houses, bonds are essentially flexible kinds of financial instrument, which can be purchased by anyone provided company that they will repay the money borrowed by selling the bonds with interest on a specified date.

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Saving bonds are different from the other U.S. government bonds or any other bonds. They are not liquid investments, and the treasury of a country usually refers them as non-marketable securities. It also translates to the fact that there are no secondary markets for saving bonds.

In the majority of the markets, it is observed that bonds move in the opposite direction of stocks. If stock prices are up, bond prices witness a downturn and if stock prices are down, bond prices are generally on an upsurge.

A common expression in bond trading is ‘over 100′, which means that a bond is trading at a premium to its issue price, and bonds that are ‘under 10′ are trading at a discount. The 100 refers to 100%, where 100% is the initial price.

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Since they first emerged 100 years ago, surety companies in the United States have evolved considerably, nowadays delivering reliable, efficient and high-quality services. Consequently, surety bonds have diversified considerably in the last few years, addressing a wide range of risk situations.

Bonds are normally issued by governments, corporations, municipalities, supranational agencies such as the European Investment Bank or the Asian Development Bank and credit institutions. All these entities require money to operate. They borrow money from the public by issuing bonds. The agency or company issuing bond promises to pay original principal along with interest that is due by a set date called maturity date.

Saving Bonds-The government also issues saving bonds. A major advantage of this bond is one can easily get tax exemptions by investing in these bonds. Features of mutual bonds-It is very important to understand the features of a particular bond you are investing in . Maturity period, purchase price and financial constraints also deciding factors, which must be taken into account while investing in mutual bonds.

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Another interesting fact about the savings bonds are that an investor doesn’t have to pay commissions or fees while redeeming the same. In case an investor redeems a bond before the time of maturity, the government might exact a penalty, which can result in forfeiting some interest.

In the majority of the markets, it is observed that bonds move in the opposite direction of stocks. If stock prices are up, bond prices witness a downturn and if stock prices are down, bond prices are generally on an upsurge.

Bonds have a purchase price, a sale price, and also an interest rate. If you purchase one, you (as the bondholder) are entitled to payment of the principal when the bond matures, as well as interest payments twice a year.

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In order to prevent major financial losses and an entire succession of undesirable results, increasingly larger numbers of companies nowadays consider using surety bonds when closing major deals. In the construction industry and not only, surety bonds have a crucial role, enabling project owners to minimize serious financial risks.

If you don’t like investing in bonds directly, you may also choose from a wide range of bonds by investment companies. You can buy bond funds investing in different types of bonds, including investment grade, high defer and overseas bonds. Some funds also specialize in investing in budding market bonds.

Government Bonds-The concerned government authority, to raise funds generally issues government bonds. They are also risking free in nature. They also provide one with tax exemptions.

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In addition, bonds that provide higher coupon payments will fluctuate by less than bonds that pay lower coupon payments. Staggering the maturity dates of bonds, which mixes bonds with short, medium, and longer periods to maturity, as well as mixing the institutions issuing those bonds (to include governments and some corporate bonds) will allow you to build a diversified bond portfolio).

There are different types of bonds, some of the commonly issued ones are asset-backed securities. These securities make use of assets, which are not tangible in nature. Some scrutiny is done to make these assets available for investment to a much broader range of investors.

Basically, your bond pays more in interest than a competing investment. As to how much they’re likely to rise, well, that’s a lot more complex, and certainly outside the scope of this article.

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Since they first emerged 100 years ago, surety companies in the United States have evolved considerably, nowadays delivering reliable, efficient and high-quality services. Consequently, surety bonds have diversified considerably in the last few years, addressing a wide range of risk situations.

The other advantage’s real estate includes bonds often have less instability than stocks, especially short-term bonds, bonds offer regular income, and bonds are sold in small dollar amounts. Somebody recommends investing in bonds in countries like Britain, which are vigilant about increase, stable, and pay higher yields (5Percent+) then U.S.A bonds.

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One of the unique features of these bonds are that if an investor doesn’t keep these for a month, he is still entitled to receive interest for the whole month; meanwhile, other bonds pay interest for the exact days that the investor keeps the bond with him.

The quest to earn money has been one of the basic instincts in man ever since goods were quantified in terms of their value in the marketplace. The habit of saving has always been a wise one; even with basic income, one tries to save wealth for a rainy day.

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Nowadays, surety bonds can take various forms, play a wide range of roles and are commonly used to secure the terms of major contracts. At present, surety bonds are extensively used in the construction industry, as contractors are often obliged to provide project owners a bond that guarantees the respecting of the terms stipulated in the contract. Sometimes owners are also required to provide payment bonds to ensure that the suppliers and construction teams will receive their payment in time.

Many “savers” want liquidity or fast admittance to their money without penalty. Bonds provide a pleasing saving or investment vehicle for many reasons. ICC broker bonds are definitely safer than stocks because if you hold bonds until the maturity date, you don’t risk your principal plus, bonds give you regular income as interest. The investor may think about the fluctuations on interest rate, but if you hold the bond until the maturity fluctuation on your investing does not matter.

Saving Bonds-The government also issues saving bonds. A major advantage of this bond is one can easily get tax exemptions by investing in these bonds. Features of mutual bonds-It is very important to understand the features of a particular bond you are investing in . Maturity period, purchase price and financial constraints also deciding factors, which must be taken into account while investing in mutual bonds.

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A few things that one must remember while buying these bonds are that saving bonds sold on the Internet are not interest-bearing securities, since savings bonds are non-transferable. Moreover, buying bonds as a part of the chain letter or pyramid is also prohibited, and saving bonds cannot be posted as collateral while applying for a loan with any bank.

An issuer issues a “foreign currency” bond in a currency other than its national currency. The issuer issues the bond in foreign currency to make it more attractive to buyers and also for taking advantage of international interest rate differentials. Government bonds are bonds issued by a government to finance fiscal borrowing requirements.

Like all investments, bonds have a risk factor. If a company goes bankrupt, bondholders do take priority over shareholders when it comes to paying out creditors, but if there’s no money available anyway, your place in the queue is basically irrelevant.

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Although many people still confuse a surety with an insurer, they are two distinctive notions. Thus, it is very important to distinguish between suretyship and insurance agreements. For instance, a liability insurer may pay a third party on behalf of the insured, in which case the insured is under the protection of the insurer. By contrast, in case of surety bonds, the surety guarantees the performance of a certain contractor to the owner of a project, but the surety bond protects the project owner instead of the contractor.

Bonds also offer tax benefits for certain investors. For instance, the interest earned from bonds that are issued to raise money for building bridges and roads is always tax exempted. Hence, bonds are beneficial for those who are retired or want to reduce their total tax liability.

The free market economy promotes a “winner take it all” environment. As a result, it has become utterly crucial for all of us to invest some portion of our income in bonds and earn some more bucks. A host of financial services is also on offer by different investment gurus who help you decide the right move at the right time when investing in bonds.

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