Although residential construction continues to lag, nonresidential construction and infrastructure builds are on the move. There’s even some optimism and murmuring that recession is not a foregone conclusion. Ready to dig in? Here’s where the action is.
Roadwork
With the exception of residential building, constructors are busy, says Construction Dive, highlighting the largest infrastructure efforts that have broken ground recently and include: the Texas Department of Transportation’s $576 million reconstruction of Interstate Highway 820 in Fort Worth and the $548 million Interstate High 35 widening in Austin; and, the $364 million repaving project in Honolulu, Hawaii. On the whole, Richard Branch, chief economist for Dodge points out that the construction industry “continues to weather the storm of higher inflation rates,” and sums up recent reports noting:
“While the residential sector is feeling the pain, the nonresidential building and infrastructure sectors are hitting their stride,” said Branch in the report. “Some weakness is to be expected as the Federal Reserve continues its battle with inflation. However, the damage should be isolated to a few verticals and not as widespread as what the industry witnessed during the Great Recession.”
Construction starts in the Midwest and South Atlantic have been especially strong and industry experts remind us that many a contracting business has navigated its way to success during bumpy times. Why not claim your next victory when you get a surety line of credit—in writing—and a whole lot of other advantages with The Partnership Account for Contractors®? After qualifying for this free service, you’ll be more ready to win new contracts then ever. The Partnership Account gives you a private digital dashboard, providing a day to day snapshot of your single and aggregate limits, as well as your current and available bond capacity. Go ahead: update your work on hand, increasing your aggregate so you can move that next project forward. Bid bonds, performance bonds, payment bonds: in a snap! Got a special opportunity coming along? Let’s talk!
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Good To Hear: Optimism?
Though of course crystal balls don’t exist, some finance industry leaders are beginning to think recession may be avoided. For example, a report from Moodys says, “Strong job and income growth, abundant cash and available credit for some and rising prices should overcome the remaining drags from low confidence, a return to service spending and lingering supply constraints….” According to Construction Dive, Goldman Sachs also believes the country will “narrowly avoid recession,” and forecasts “a smooth easing in the tight labor market and noting both an unclogging in supply chains and well-moored expectations for long-term inflation.”
Re-Thinking Year End Strategies
When growth is the goal, keeping an eye on working capital is essential. Philip Shepard, Head Underwriter at Colonial Surety, reminds us that working capital is essential to secure underwriting for new commitments. Consequently, contractors in the habit of utilizing lines of credit from the bank near the end of the year, may want to rethink this strategy. When contractors utilize a chunk of their banking lines of credit at year end, and carry unpaid bills into the next calendar year, their financial balance sheets likely reflect more debt than they really have. While this tactic may dilute net earnings and result in paying less taxes, it also reduces working capital, weakening capacity to secure larger bonding lines. Instead, contractors working toward securing larger bonds should reduce debt and concentrate on working capital.
Why go it alone when it comes to plotting your finances for strategic growth? With The Partnership Account for Contractors® from Colonial Surety you’ll have lots of useful intel at your fingertips—and our expertise on your side— as you advance your business strategically, one step at a time.
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Founded in 1930, Colonial Surety Company is a leading direct seller and writer of surety bonds and insurance products across the USA. Colonial is rated “A Excellent” by A.M. Best Company and U.S. Treasury listed.