Independent Banker - August 2019 - 77
CORPORATE MEMBERSPOTLIGHT
SURETY BONDS SECURE LENDERS AGAINST RISK
ON CONSTRUCTION LOANS
When you fund a construction project, you're building your
community. But every project comes with risks that put your
reputation and money on the line. That's what makes surety
bonds-performance and payment bonds-so important. They
protect both project owners and lenders by ensuring contract
obligations are completed. The surety thoroughly examines
the qualifications and financial wherewithal of each company
that seeks to be bonded. Those companies work with bonding
agencies, members of the National Association of Surety Bond
Producers (NASBP), to ensure that they meet all underwriting
criteria demonstrating their ability to perform. The fundamental
concept behind surety bonds is that contractor default is preventable.
That is why surety companies back their bonds with
their own assets and stand ready to complete obligations in the
unlikely event of a default.
Requiring a borrower to obtain performance and payment
bonds of the contractor on its construction project should dramatically
improve the bank's risk on that loan. Moreover, those
bonds protect the value of the bank's collateral since the value
of a completed construction project far exceeds the value of
an incomplete project. Banks can ensure that their interests are
protected by adding a rider to the contractor's surety bond that
grants the bank a direct right to make a claim against the bond.
Members of the NASBP are knowledgeable surety professionals
who stand ready to assist and counsel any business with questions
about qualifying for surety credit. NASBP's president, John
Bustard of the firm King & Neel, Inc. in Honolulu, Hawaii, knows
firsthand the advantages that surety bonds provide to local
banks in Hawaii. " Bonds give lenders here in our marketplace
peace of mind, given that construction is risky and constructors
can fail. It's important that lenders understand that bonds transfer
the risk of contractor default away from the project owner
and the lender to the surety company. " Bustard adds, " In today's
construction climate, surety bond requirements are simply smart
business. "
Go to suretylearn.org and nasbp.org to find more resources from
NASBP. NASBP members are happy to answer any questions that
community bankers may have regarding the merits of surety
bonds as conditions of project financing. Go to nasbp.org/guaranteed/find-pro
to find an NASBP member near you. Insist on surety
for every construction loan, so all your projects will be guaranteed
to succeed!
John Bustard
President
National Association of Surety Bond Producers
240-200-1270 | info@nasbp.org
nasbp.org/home
http://www.suretylearn.org
http://www.nasbp.org
http://www.nasbp.org/guaran
http://www.nasbp.org/home
Independent Banker - August 2019
Table of Contents for the Digital Edition of Independent Banker - August 2019
Table of Contents
Independent Banker - August 2019 - Intro
Independent Banker - August 2019 - Cover1
Independent Banker - August 2019 - Cover2
Independent Banker - August 2019 - Table of Contents
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Independent Banker - August 2019 - Cover3
Independent Banker - August 2019 - Cover4
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