1. BONDING & ACCESS TO CAPITAL SMALL CONTRACTORS INITIATIVE

2. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration WELCOME −Meet the trainers and cohort −Share resumes −Course overview −Sponsored by U.S. Department of Housing and Urban Development (HUD) ○ Prepared by TDA, Inc. ○ Delivered by local intermediary 2

3. SESSION 1 INTRODUCTION TO BONDING AND BUSINESS PLANNING

4. 4 U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration PART A: BONDING

5. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration LEARNING OBJECTIVES −Articulate various types of bonds and basic criteria for obtaining performance bonds −Understand process of course and how it will help to obtain bonding −Identify criteria and/or documentation your company already has in place and what to focus on during course 5

6. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration SURETY BOND BASICS What is a surety bond? A surety bond ensures contract completion in the event of contractor default. A project owner (called an obligee) seeks a contractor (called a principal) to fulfill a contract. 6 https://www.flickr.com/photos/usacehq/5056771149/ U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration

7. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration SURETY BOND BASICS The contractor obtains a surety bond from a surety company. If the contractor defaults, the surety company is obligated to find another contractor to complete the contract or compensate the project owner for the financial loss incurred. 7 https://www.flickr.com/photos/usacehq/5056771149/ U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration

8. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration 8 BONDS IN ACTION

9. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration DO I NEED A SURETY BOND? −Why get them? ○ Required by an agency, owner, or general contractor ○ Establishes your company as credible and capable ○ Allows you to access a larger pool of contract opportunities −What will they do for you and how are they used in practice? ○ Bonding shows those letting contracts that you have capacity to do the job ○ This lowers risk of hiring your company 9

10. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration BONDS vs. INSURANCE Doesn’t my insurance policy cover that? 10 ○ Insurance policies cover damages or loss to people or property ○ To get fire insurance, you pay a premium If house burns, insurance company covers cost to rebuild property Not losses customers suffer if you fail to perform https://www.flickr.com/photos/imelda/2966256223/

11. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration BONDS vs. INSURANCE −To get a bond, you also pay a premium ○ But if you default on your contract, the surety ensures the work is completed and everyone is paid … ○ … and then looks to you to recover all of their losses 11

12. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration TYPES OF SURETY BONDS −BID BOND ensures the bidder on a contract will enter into the contract and furnish the required payment and performance bonds if awarded the contract. −PAYMENT BOND ensures suppliers and subcontractors are paid for work performed under the contract. −PERFORMANCE BOND ensures the contract will be completed in accordance with its terms and conditions. −ANCILLARY BOND ensures requirements integral to the contract, but not directly performance related, are performed 12

13. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration WHY GET A BOND? Construction is a risky business −According to BizMiner, one in four contractors fails. −No matter an owner’s relationship with a contractor, the owner should rely on a surety bond for the best protection on a project. −The surety prequalifies the contractor to guarantee, in the surety’s opinion, that the contractor has the capital, capacity, and character to complete the project. 13 https://www.flickr.com/photos/deanhochman/14518531860/ U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration

14. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration KEY UNDERWRITING CRITERIA 1.Capacity 2.Financial strength 3.Character 4.Guarantee 14 https://www.flickr.com/photos/vonderauvisuals/8636722022/ U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration

15. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration CAPACITY Can I manage the construction work and business aspects of the job? ○ Abilities ○ Management ○ Work experience ○ Company history How will I demonstrate that I have the capacity? ○ Business Plan ○ Track record ○ Licenses and certifications 15

16. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration FINANCIAL STRENGTH Does my business have a demonstrated ability to manage its finances well, and maintain sufficient working capital to get the job done? ○ Financial history ○ Financial management systems ○ Working capital available How will I demonstrate this? ○ Financial statements ○ Systems in place or supports available ○ Cash on hand and/or line of credit 16

17. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration CHARACTER Can I be trusted to deliver on my commitments, and complete the work even as I encounter problems on the job? How will I demonstrate this? ○ Personal and corporate history and references ○ Credit ○ Evidence of clearing up past problems ○ Continuity plan 17 https://www.flickr.com/photos/therefore/18542525/ U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration

18. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration GUARANTEE If my capacity and financial strength are not enough, how can I give the surety the confidence they need that they will not suffer a loss on this job? ○ Funds control ○ Collateral ○ Co-obligee or partner ○ SBA Bond Guarantee 18

19. 19 MATURING to BONDABLE STATUS

20. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration EARLY YEARS 1.Organized as a business 2.Capacity ○ Construction ○ Business management ○ Financial management 3.Track record 4.Looking to grow 20

21. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration 1.Business planning 2.Management systems 3.Increasing access to credit and working capital 4.Multi-year financial projections 5.Certification (small, disadvantaged, local, etc.) 21 PREPARING TO GROW

22. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration PURSUING BONDING 1.Demonstrating capacity, character, and financial strength 2.Seeking government contracts and other work that requires bonding 22 3.Applying for a bond 4.Satisfying the surety and SBA requirements 5.Providing a guarantee

23. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration GETTING BONDED 1.Contractor Information Form 2.Preliminary or conditional approval (Bid Bond, Bond Line) 3.Winning a contract award 4.Updating evidence of meeting all requirements 23

24. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration TYING INTO THIS COURSE −Key components designed to help you establish your qualification for a bond ○ Business planning ○ Financial management ○ Working capital ○ The bonding process −Other components will help you search for contracting opportunities and understand likely benefits and challenges of those opportunities ○ Procurement and partnering ○ Federal requirements 24

25. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration LINK TO ACTION PLAN −Contractors review their draft Action Plan ○ We will identify where each action item is addressed in the course ○ Review with facilitator for required updates or revisions −Participants share highlights of their Action Plans with the cohort 25

26. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration RESOURCES Links with detailed information on bonding: −SBA “Surety Bonds: The Basics” https://goo.gl/m5pmvmhttps://goo.gl/m5pmvm −How do bid and performance bonds work? Video from JW Surety http://goo.gl/nKC8DP http://goo.gl/nKC8DP −Construction bonding overview http://goo.gl/1EZpqMhttp://goo.gl/1EZpqM −Surety Bonds in Plain English http://goo.gl/hHfn0xhttp://goo.gl/hHfn0x Attachments with more information on bonding: −Performance Bond Application −Payment Bond Application −Surety 101 26

27. 27 U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration PART B: BUSINESS PLANNING

28. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration LEARNING OBJECTIVES 1.Understand process of this course, and how it will help to prepare a business plan 2.Identify criteria for essential sections of plan required for bonding application 28 https://www.flickr.com/photos/96dpi/3227807209/ U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration

29. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration WHY PLAN A BUSINESS? −Avoid failure −Apply for a working capital loan −Receive a bond −Grow your business 29 https://www.flickr.com/photos/usacehq/6141166487

30. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration 30 A BUSINESS PLAN IS… https://www.flickr.com/photos/ocarchives/3952964087/

31. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration 31 BUSINESS PLANS CONTAIN:

32. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration A BONDABLE PLAN… −is impressive −indicates pipeline −offers sophisticated management and accounting −highlights profit −provides continuity −proves capacity 32 http://farm4.static.flickr.com/3342/3312839229_9ae775c101_o.jpg U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration

33. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration EXAMPLES OF PLANS −Big general contractor −Small general contractor −Electrical subcontractor 33 https://www.flickr.com/photos/ganatlguard/5891371057

34. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration WE WILL USE… −Reference manual −Business plan template −Examples −Your business −Mentoring site visits −Multiple edits 34 http://farm3.static.flickr.com/2433/3725860708_a31b194503_o.jpg U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration

35. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration BUSINESS PLAN TEMPLATE −On USB drive −Word document −Excel workbooks −PowerPoint shell −Rename file −Two-minute cover page 35

36. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration 36 8 PLANNING STEPS Clarify vision and missionDescribe your businessVerify your environmentBuild a teamProject financialsMarketing for image & productsIdentify and defeat riskRevise, develop, sell

37. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration WHAT IS YOUR BUSINESS PLAN? −How will you create a powerful document? ○ who ○ when ○ what −List tasks for preparing company-specific business plan ○ due dates ○ assignments 37 http://farm3.static.flickr.com/2579/3725044529_66d46ef24c_o.jpg U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration

38. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration 38 WHAT DEFINES A BUSINESS? related unrelated

39. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration 39 HOW WILL WE BEGIN? DESCRIBE YOUR BUSINESS: THE ONE-HOUR PLAN BACK HOME APPLICATION

40. U.S. Dept. of Housing and Urban Development - Community Planning and Development U.S. Small Business Administration RESOURCES Links with detailed information on business planning: −Business planning software ○ bplans.com bplans.com ○ businessplanpro.com businessplanpro.com −NAHB.orgNAHB.org ○ Market analysis ○ Mark-up benchmarks −SBA.govSBA.gov ○ Learning Center (lots) ○ Create Your Business Plan (10) 40