Bond Pro Final Contract or Bid Worksheet
The Final Contract or Bid Worksheet form is a combination of all the items that come from the actual bid or final contract which includes, but is not limited to, the following:
1. Description or scope of work
2. Location of actual job
3. Obligee just as it is to appear on the bond
4. The amount of bid or final bond
5. Time to complete the project
6. Penalties for non completion usually a per day figure or not at all
7. A number of other job specific and general questions
Personal Financial Statement
The Personal Financial Statement form is used for the personal financial statement of the principal for their own account or as officer of a corporation. It is for your use in the event you do not have an existing statement prepared. If you have your financial information on your computer and can produce a statement with a program such as Quicken® or QuickBooks®, that is fine. We can supply the form if you do not have that option. If you have a personal financial statement prepared by a CPA, please supply that statement.
The personal financial statement gives the surety a view of all your assets and liabilities at the time of the application for the bond. Financial information can change dramatically in a short time, so the statement must be timely. If your present personal financial statement is over two or three months old, you will need to create a new one. For those who have numerous properties, some wholly owned and/or some in partnerships, we will need a spreadsheet that shows the purchase price, date of purchase, current value, loans, income and your ownership percentage.
In some instances the surety may need to know of any additional expenses or unusual circumstances that pertain to a property that would affect the value and income of the property. Stocks may be verified by supplying a statement of the account from a broker. If you have a line of credit at the bank, please supply a statement from the bank showing the actual line of credit limit, along with the used and unused portion. A bank statement showing a substantial amount of liquid assets in the form of cash or CDs may also be required. Your goal should be to present as strong a statement as possible.
Business Financial Statement
Business Financial Statement | Forms | General Guidelines
Some License, Permit, and smaller bonds require a Business Financial Statement.
This statement is usually internally generated by the applicant. The two most common computer programs that small businesses use to generate business states are Quicken® and Quickbooks®. The two most important parts of a financial statement (the ones that the underwriter wants to see) are the Income and Expense Statement and the Balance Sheet. The income and expense statement shows all income for a specified period of time, along with the general and administrative expenses. The balance sheet shows the Assets and Liabilities along with the value of the company. The underwriter uses various formulas to evaluate your company to see if the cash flow and profits are sufficient to support all your projected jobs, not just the proposed bonded jobs.
Financial statements are usually required for the prior year end. This will show a complete year of business and tell the surety company underwriter how well your company performed. The underwriter will ask for a financial statement from the beginning of the to date (called Interim) for the present year. The surety wants the most recent months that you can provide on the financial statement, so they can see how your company is performing to date.
Some businesses do have peak seasons and other special financial circumstances that are only shown when the whole year is complete. Therefore the prior year should show this type of activity. If you have any special circumstances that affected the financial condition for your company, you should include a letter of explanation. If you have omitted because you are waiting for that information, you should specify that in a letter of explanation.
When a CPA prepares your business financial statement, he should be made aware of special circumstances that affect the financial condition of the company. He will write a letter of explanation that covers each of the items that need to be explained.
If you own a lot of assets, list of those assets such as stocks, bonds, CDs and or equipment, especially if these are large items on your financial statement. You may want to include the most recent statements from the financial institutions where assets are located. These statements should show the value of your company at the time of the statement. They are much like a bank statement.
If you own real estate, include a spreadsheet that shows the type of property (such as SFR for single family residence, office building, apartment etc), purchase price, date purchased, percentage owned, amount of all mortgages, amount of the mortgage payments, names, addresses, and phone numbers of lenders, present value of the property, income of the property and annual taxes. This gives a fairly complete picture of income stream and hard costs of the properties.
Checklist
1. Most recent year complete financial statements
2. Interim statement for the present year
3. They should include Income and Expense along with Balance sheet.
4. Letter of explanation if needed.
5. Attach any spreadsheets of real-estate or assets.
6. Any additional information or statements
It is important to provide complete and accurate information regarding your company to facilitate the bond process.
Business Financial Statement | Forms | General Guidelines
Short form Business Financial Statement
The surety company may accept a short form Business Financial Statement for smaller bonds. We provide a business financial statement form that shows most of the information that is on a personal financial statement. Please fill out the form as completely and legibly as possible. Please include an explanation letter if needed. Do not leave blanks. If the information requested does not apply, indicate that it is not applicable (N/A). Please print your answers with blue or black ink. Forms differ for each surety company. Your goal should be to present as strong a statement as possible.
Checklist
1. Completed Business Financial Form
2. Letter of explanation if needed.
3. Attach any spreadsheets of real-estate or assets.
4. Any additional information or statements
Explanation of Appraisal and Title Report
Explanation of appraisal and title report non refundable fee paid direct to surety
Some companies accept collateral as security for the risk to the surety. With collateral held as security for the bond, the surety company is in good standing to obtain funds in the event of loss. When the surety company takes real estate as collateral, the first step in accepting the offered real estate is to obtain a title report and perform an appraisal in order for the surety to determine ownership, value of the asset, and make sure that there are no additional liens on the property. In most cases the surety company will only accept an appraisal from their own appraiser and will obtain a title report from their own title company.
The surety company would prefer first position on the property being offered as collateral. In most instances these properties have an existing first trust deed attached to them. The only other position that surety will take is second position after a first deed of trust. The time it takes to get the appraisal is the limiting factor. If you have had a recent appraisal done they may consider that. The surety has a formula that is based on the worst-case scenario when they evaluate the property such as foreclosure, readying property for sale, time on market to sell, and selling costs. The surety takes the appraised value and reduces the value by their formula. At the date of this writing the market has flattened out and started to decline along with interest rates rising. The upward trend in the interest rate is precipitated by the Federal Reserve cost of funds and values are starting to decrease. In a downward cycle, the surety will not be as willing to take real estate as collateral. The new upward or downward cycle will be factored into their evaluation to make sure that they are getting the requisite value to cover the bonds that they are being asked to issue.
Explanation of Bond Pro Final Contract or Bid Worksheet
The Final Contract or Bid Worksheet form is used by surety to evaluate risk. It asks redundant information that can be obtained from other items you have submitted. Take care to complete the form legibly and completely. Note the particulars about the job or contracts to which it applies. Make sure to supply other bids that were higher than yours if this is a final bond. Please indicate if it was a direct award of final bond without any other bids. If it is a bid bond, please also make sure to include information that tells the surety what percentage is sub-contracted out, how many days or months are required to complete the job per the contract, and what the penalties are for going over the description of the work.
The surety will assess your ability to meet and complete the contract based on the information that you supply. If you have information that you think is important, but has not been requested on the form, supply it as an attachment.
Explanation of Collateral Agreement
Collateral security agreements contain the amount and form of the collateral. This agreement describes the events and procedures that must take place for your collateral to be released to you. In the case of real estate, the trust deeds are removed by filing a deed of reconveyance. This is a fairly long process. You should not put up real estate as collateral if you need to sell or refinance the property during the bonding time frame. The surety might not want to release the collateral especially if you are in the middle of a job or a loss has occurred.
In the event of a hardship, the surety company might considered a substitution of collateral. If the substitution is acceptable to the surety, the surety will provide a new collateral security agreement. When the obligee has signed off on the contract and the job via written documentation, you may ask for your collateral to be released. It the surety has taken cash as collateral, it is a much faster process than the return of real estate.
The surety company will not release the collateral if the obligee has not issued an exoneration and release of contract showing that the work has been performed as per the contract, that there are no defects and that the obligee has completely paid the principal all the funds due. Even though the obligee has done all of those things, the surety will wait for a reasonable period of time for any third-parties to bring notification of breach or non-payment of labor and/or suppliers. When the surety company is certain that there is no reasonable possibility of claim against the bond it will release the collateral.
Explanation of General Indemnity Agreement (GIA)
The indemnity agreement states that you will protect and defend the surety company from loss. You will pay for any losses or expenses incurred, and make the surety whole in the event of loss. This is a bond, not insurance. It means that in the event of loss you must do whatever is necessary to resolve the loss. If the surety has to pay for any or all expenses and fees, you are responsible for reimbursing the surety for same. The bond premium is designed with the assumption that there will be no loss. This is the reason for all the financial information, security and collateral. Please read the indemnity agreement and if you are signing a GIA, read the entire document and understand that it outlines the duties and responsibilities of the parties to the agreement.
Explanation of Forms 5500 Filing
What information is your pension plan required to disclose?
The Employee Retirement Income Security Act (ERISA) requires plan administrators to provide in writing the most important facts about the pension plan. Some facts must be provided to you regularly and automatically by the plan administrator. Others facts are available upon request, free of charge, but you may be required to pay for copying fees. Your request should be made in writing.
A summary of the plan description or SPD is one of the most important documents you are entitled to receive automatically when you become a participant of an ERISA-covered pension plan or a beneficiary receiving benefits under such a plan. The SPD is an important document that states what the plan provides and how it operates. It states the starting date of your participation in the plan, how your service and benefits are calculated, when your benefit becomes vested, when you will receive payment and in what form, and how to file a claim for benefits. Your plan administrator is legally obligated to provide to you, free of charge, the SPD. You should read your SPD to learn about the particular provisions that apply to you. If a plan is changed you must be informed, either through a revised SPD, or in a separate document, called a summary of material modifications, which also must be given to you free of charge.
Each year the plan administrator must automatically give you a copy of the plan's summary annual report, in addition to the SPD. This is a summary of the annual financial report that most pension plans must file with the Department of Labor. These reports are filed on government forms, Form 5500 or 5500-C/R. The summary annual report is available to you at no cost. To learn more about your plan's assets, you may ask the plan administrator for a copy of the annual report in its entirety.
If you are unable to get the SPD, the summary annual report, or the annual report from the plan administrator, you may be able to obtain a copy by writing to:
U.S. Department of Labor
EBSA Public Disclosure Room
200 Constitution Avenue, NW, Suite N-1513
Washington, DC 20210
A participant should include his/or her name, address, and telephone number to assist the Employee Benefits Security Administration (EBSA) in responding to their request. There may be a nominal copying charge.
If you have information that plan assets are being mismanaged or misused, send details to the nearest EBSA office.
Explanation of Indemnity Agreement
When you sign an application for a license or permit bond the application contains the indemnity agreement. In some cases you sign as a principal and Indemnitor which means you are signing as an officer or owner of the company and then personally. The indemnity agreement states that you will protect and defend the surety company from loss. You will pay for any losses or expenses incurred, and make the surety whole in the event of loss. This is a bond, not insurance. It means that in the event of loss you must do whatever is necessary to resolve the loss. If surety has to pay for any or all expenses and fees, you are responsible for reimbursing the surety for same. The bond premium is designed with the assumption that there will be no loss. This is the reason for all the financial information, security, and collateral. Please read the indemnity agreement and if you are signing a General Indemnity Agreement, read the entire document and understand that it outlines the duties and responsibilities of the parties to the agreement.
Explanation of Work in Progress or Status of Contracts
The Work in Progress form is used for a number of underwriting functions and analyses. The answers to the questions on the form will allow the surety underwriter to view a time slice to see how many contracts you are working on, bonded and unbonded, and how far you have progressed based on how you actually bid the job. It gives a number of indicators that relate to the profit estimates, payments, and percentage of completion for those contracts. The better the profit, the better you look.
This form can be linked to aging accounts that are used for accounts receivable. This determines how long it takes your obligee or owners to pay you. It can also indicate whether there is a problem with your work or whether the obligee is having cash flow problems and not timely paying you. If there is a long lag in your receipt of payments for work performed, the surety may ask whether you will be able to pay your own bills in the absence of the obligee’s payment to you. It also determines whether you are timely in paying your suppliers. Alternatively, the form could show that most contracts are complete and that the new job or contract will not be a high risk or burdensome to the contractor.
Time and care should be taken to make sure that the form is filled out properly and accurately and that totals are provided. If the form is not totaled the underwriter will not process it and return it to you for completion. Being thorough minimizes time delays.
General Guidelines
Web site and all contents © Copyright Hawkins & Hawkins 2006, All rights reserved.
California License Number: OB33276, 0655770
Webmaster: www.JWattsWebDesign.com
