While I think our economy continues to heal from what we are seeing the next 12 to 18 months will see more failures of the weak in commercial real estate and the construction industry.  2012 will be a tough year on the sureties and surety credit will even be harder to obtain over the next couple of years.

Many years ago when we were getting started, it was another tough time for surety credit and I will never forget those times.   The surety industry talks about the three “C’s” to obtain bonding capacity:  Capital. Capacity. Character. To me it was more like Capital. Capital and more Capital were the three “C’s”.

I believe there should be an “E” added in for Experience. If I were a surety, I would take less capital if there was a healthy dose of “experience” mixed in, but this is hard to list on a financial balance sheet. To me no substitute for the experience of hard knocks.

Beyond the Three C’s

I asked our surety manager, Ms. Sandi Benford of Berkley Surety Group, what she looks for in a good credit risk (beyond the three C’s and other underwriting). Here is what she had to say:

  • A contractor that is able and willing to communicate the good and the not so good. No Surprises.
  • A company that is able to forecast with accuracy. Being honest with oneself.  If there is a problem on the horizon have at least some semblance of an action plan.
  • If the company is experiencing ongoing losses, does upper management act with personal responsibility equability considering others in the company?

Thoughts and Comments?

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
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