Boost your bonding capacity with shareholder loans

Description

Abstract: One strategy that a construction business can use to enhance its financial position and boost its bonding capacity is to have the owners make loans to the company. So long as these “shareholder loans” (which can also be made by entities other than corporations — such as LLCs and partnerships) are subordinated to bond claims, most sureties will treat the proceeds as a capital equivalent in evaluating a company’s bonding capacity. This article discusses the advantages of these loans and the criteria they must meet.