Phoenix, AZ (PRWEB) July 14, 2010
In the last few years car dealerships have suffered economic turmoil. Many Small businesses have had to close their doors due to the lack of affordability for their Surety Bond or because the dealership could not meet the surety company’s financial requirements.
In the past if the Principal had credit issues they were forced to post 100% collateral either with the State or with the Surety Company. Co-signers were also a requirement in some cases for applicants whose credit did not meet the surety company’s requirements. For the majority of businesses obtaining a co-signer or posting collateral is not an option. Due to this, thousands of small businesses had to close their doors and many new dealerships were not able to get their businesses off the ground.
Small business is the backbone of our economy and one Insurance Agency wanted to help by implementing a smart approach to underwriting MVD bonds.
Worldwide Insurance Specialists, Inc gave a quick explanation on why a MVD Bond program is necessary on helping the car industry get back on their feet.
With more government regulation and the economy it has made it harder to obtain surety credit. Car dealers are now facing higher bond amounts, which has had a dramatic impact on small businesses. A few years ago the majority of bonds were under $10,000; now car dealerships are facing upwards to $50,000 bond amounts. While a $50,000 bond amount does not sound like a large requirement, many applicants have a difficult time coming up with the net worth in order to get an approval for the MVD bond. The Bond is a requirement for motor vehicle dealers to obtain their dealers license. Without the MVD Bond dealers are not in compliance with state law and are unable to conduct business until the licensing requirement is met.
The second factor in qualifying for a bond is credit. The surety company has a specific set of standards when it comes to credit. Applying for a surety bond is similar to applying for a loan. The majority of surety companies have a minimum credit score requirement which is generally 660 or higher. When you’re a small business, the average credit score is below this due to the influx of profits for Motor Vehicle Dealers. If the principal’s credit score is below this requirement, the Surety will require collateral or a co-signer for most cases and can even result in a declination. A principal’s score is not the only other factor that is involved. If the principal has any of these issues including collections, past due accounts, bankruptcy, civil judgments, or tax liens; the surety may require a co-signer or collateral.
The third issue when applying for a bond is the financial stability of the company. Since a surety bond is similar to a loan, the surety company requires a positive financial outlook. If the dealership has a mvd bond claim, they must pay back the surety in full. Due to this factor, the applicant must show that their company can support a claim. It is common knowledge that car sales are not what they were before, and I’m confident that eventually the industry will bounce back. In the interim small businesses need help.
Fortunately car dealers have a choice now.
With this new program, Car Dealers can now obtain surety bond with as little as 5% of the bond amount versus the standard 15% with a strong co-signer or collateral. Another great enhancement to this program is that it helps struggling Auto Dealers by waiving the co-signer and collateral requirements.
This program brings an affordable solution for dealers that couldn’t pay the bond premium or qualify. This program is also allowing small businesses to retain more working capital for other costs due to the reduced price for their motor vehicle dealer bonds.
Please Call Worldwide Insurance Specialists, Inc for more information at 1-888-518-8011 or visit their website at http://www.bond007.net.