By Jamie Collum and Andrew Cartwright for Canada.ConstructConnect.com
The last edition of Surety Corner introduced the topic of bond limits, what might be holding back a contractor’s growth and the general areas of focus to ensure you are maximizing your bonding limits.
The example we had used was contractor XYZ who had $500,000 in working capital, which translated to a $10 million aggregate bonded work program based on 20 times leveraging. However, XYZ is looking to take on a larger job and to fit this project into their backlog they need to increase the aggregate limit to $12 million.
As a refresher, working capital is cash plus receivables less current liabilities (trade payables, wages payable, taxes, current portion of debts, etc.).
So, based on the above scenario what options does contractor XYZ have available to boost working capital and ensure they have the adequate limits available?