SECONDARY BONDING MARKET

Secondary Bonding Market ContractorSECONDARY BONDING MARKET

Contractors that are not able to get performance and payment bonds must look at  a secondary market or bonding company.

Type of contractors that cannot get performance and payment bonds are:

1. Contractors that are trying to get a bond for the first time.

2. Contractors who have run into trouble because inflation ate up their profit and became slow in paying the suppliers and material cost.

3. Those contractors that got caught in the severe downturn of the economy.

4. The contractors that have less than great credit scores.

5. Women contractors because the old society would not accept them in the construction market.

6. Minority contractors.

When the market changed in 1997 and the economy took a downward turn the bonding companies took a different look at bonding. With all the problems that the bonding companies had paying for jobs that did not get completed change how they write performance and payments bonds now.

Since the bonds do require a guarantee to the owner of the contract the bonding companies now require you to be financially strong with no credit problems.

In most cases they take security or collateral from the contractor to back the bond. The also require you have have enough working capital to complete the job on time.

The secondary market looks at  you a little different. They know that times were very ruff in 1997 and 1998 when the economy slip. They also know that a lot of good contractors had trouble  and were victims of the housing market.

This how the SECONDARY MARKET was developed and FUNDS MANAEGEMENT came into play.

Funds management  was develop and called TRIPARTITE AGREEMENTS by the federal government in order to get contractors that could not get bonds back into the market.

Funds management is a agreement between three parties,

1. The contractor or principal.

2.The owner of the contract or obligee.

3. Funds management controller or bonding company.

When a job is bid then the three parties agree that the funds manager will open an non-segregate account in a bank that is FDIC insured. After all three parties  approved the bills or the draw then the funds manager issues a invoice to the owner of the contract and the owner deposit the payment directly into the account that has been opened.

Then the funds manager who is the only person who can sign on the account pays all the bills an material cost which include labor cost. The fund manager also advances to the contractor the draw that was requested. It is very important that all parties agree so that the bills can be paid within 24 hours or same day if possible.

The Funds manager will hold back about 10% of the job until all parties approve the release of the job.

With funds management control it allows the owner of the contracts to use contractors that have had trouble in the past to get jobs because of the protection all parties receive.

If you need help in getting into the secondary market then please call Ric Cline at 1-800-772-9904 or direct at 719-588-3601 or anthony Gardunio at 1-505-720-1366. Thet will work with you to get the bond that you need!!

 

 

 

 

 

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