Episode Transcript
[00:00:00] Speaker A: Nobody knows what surety bonds are. After this, you'll know more than 99% of the people in the world what a surety bond is. It's essentially a three party contract that serves as a guarantee. Stop worrying about the base and start worrying about customers a little quicker. Just get right into it. Fix it as you go. Bonds don't work that way. They're written assuming that there's no risk, right? For most people, delays are way more costly than a little bit of a bond cost their contractor.
[00:00:28] Speaker B: Welcome to the Entrepreneur's Logbook podcast. I'm your host, Zachary Nerd. You can find me on Social at its Zachby. In each episodes, I bring on experts from various industries for you to learn about their strategies and insights driving extra business growth. Today we're joined by Gary Eastman, founder and president of Axis Surety and Swift Bonds, two companies helping businesses, contractors and individual navigate the world of surety bonds, a $22 billion industry that a lot of people have never heard of, but they technically encounter it every single day without knowing about it. And Giri's an attorney with an MBA and a JD who spent over 17 years serving as a general counsel for national and international companies, including several Fortune 500 companies. And that front row seat to how business handled financial risk is what actually eventually led him to build not only one company, but two companies licensed in all 50 states, having served more than 20,000 clients and facilitated over a billion dollars in surety bonds and contract value. Whether it's contractor bidding on a government project, a cannabis dispensary, getting a license, or an executive managing an estate, Gary's company is probably one of those behind the scenes making sure that there is a financial guarantee in place here. But Gary, thank you so much for joining us on the show. Welcome aboard.
[00:01:45] Speaker A: Hey, thank you so much for having us, Akri. I really, really appreciate it.
[00:01:49] Speaker B: Cool. Well, one of the things that I always love to do, Gary, because this is a business entrepreneurship podcast, one of my famous question I always like to ask is because you've obviously been around the block, you've been in a space for quite a while, I'd love to hear, like, if you had to restart your companies from scratch like today, knowing everything that you know, what's kind of like the one thing that you feel you would do differently or go like a different way about?
[00:02:14] Speaker A: Oh, yeah, that's a great question. So if we were to do something differently today, I think that in the beginning we would have spent less time worrying about different, you know, ways that we were implementing the basics of business and jump really more into focusing on customers better as well as, you know, developing partnerships quicker.
[00:02:39] Speaker B: I love that like speech execution to put it very simply.
[00:02:42] Speaker A: Not like, exactly, yeah, stop, stop worrying about the base and start worrying about customers a little quicker. Just get right into it and fix it as you go.
[00:02:52] Speaker B: Yeah, it's like the people that spend like two weeks building a website, you're like getting a logo up and running when they should be just prospecting, doing the hard work.
[00:03:00] Speaker A: That's exactly right.
[00:03:01] Speaker B: I love that. So diving into a bit like more like your company because you've been in the space for a while and for a lot of people I'm going to assume they don't know what charity bonds are in like the first place. And imagine that's a lot of our listeners and I'd love to like, for you to like walk us through like what that looks like when someone comes to you, like what does that process look like from the moment a contractor for example, realized they're like, hey, I need a bond, what am I going to do about this?
[00:03:28] Speaker A: Yep, that's a great thing. So yeah, nobody knows what surety bonds are.
After this two minute explanation you'll know more than 99% of the people in the world. So what a surety bond is, it's essentially a three party contract that serves as a guarantee. And so what happens is in federal projects that are over $125,000, it's wired.
And so, and then of course a lot of states have similar laws. So what it is, is when you're working on a federal project, you know, say for example, building a school, what you have to do is you have to, you, the contractor go out to the school and then you get a, someone who guarantees that the project's going to be done on time and everybody's going to get paid. That includes, you know, subcontractors and material vendors. That's what the bond does. And so the surety is the one that's guaranteeing that the contractor is going to complete it according to the terms and you know, on time and pay everybody. And what's good about a bond as compared with a guarantee? With a guarantee you have to make sure that they're done and you've exhausted any avenues. That's not how it works with a bond. You go directly to the surety to say, hey, here's a breach, we need to get this fixed right away. And what that does is allows a couple things. One, it guarantees that one, you have very competitive bidding Right. Because you don't have to worry about whether these people are just going to fold because obviously there's a third party guaranteeing this, and the third party is these huge insurance companies think that all the big ones.
And then, of course, then the project gets done on time. You don't have to worry about timeliness because having a road being out for an additional six months is a bad thing. Having schools be delayed past the school year, also a bad thing. So it guarantees timeliness as well as there's not even going to be a litigation holding things up. So that's the benefit of bonds, and that's why they exist all over the world.
[00:05:26] Speaker B: I love that. And there seems to be a lot of confusion around bonds and electricity bonds and insurance. A lot of people are probably going to assume, like, hey, it's probably the same thing, or there's one that kind of replaces the other.
And I'm assuming there's probably distinction that is to be made for, like, business owners here. Like, what's kind of like the risk via getting that wrong and just getting like, one of them that might not even be the good one they should be getting.
[00:05:51] Speaker A: Yep. No, that's a great question. So a lot of people think of bonds technically as a subset of insurance. Right. But they act in completely different ways. Insurance, if you want to think about it from a broad level, is risk sharing. So, you know, you write 100 policies, you know, someone's going to have that fire, you're going to pay out. Bonds don't work that way. They're written assuming that there's no risk. Right.
Because if you did, the premiums would be so high you couldn't and nobody could afford it. And so that's the major distinction. This isn't risk sharing. It's. I'm guaranteeing that this individual or the company is going to be able to get this done.
And so that's the major difference. You know, insurance kind of protects the company, while a bond protects, you know, the owner. Right. To make sure it gets done, gets done timely. The benefit of bonds, though, as compared with insurance, air insurance, is, is just in case.
Bonds also provide assurance to the owner that you're financially stable because somebody's guaranteeing that you will do your work and on time and, you know, you have the financial wherewithal, so they can see that, hey, if you're bonded, then you're in a lot more stable type of a company and can really do some good work.
[00:07:08] Speaker B: Yeah. And like, in your professional experience, would you recommend someone to have like both of those, like the insurance and like to bond or it's more really like a case by case basis type scenario.
[00:07:19] Speaker A: Yeah. So for a lot of companies, they like to have be both, what's called, you know, for many of them, they want to be the triumvirate of license, bonded and insured.
And so if you're, you know, the license you have to have, let's say you're just a plumber. Right. I get, you know, licensed by my city. Obviously I need to be insured to protect against, you know, potential risks of loss or, you know, personal injury or workers comp.
But then when you're also bonded, that's a signal to your client that you're stable. Right. And so we provide that bond that says, hey, use this as a marketing tool. We believe in you, your customers should believe in you. This provides some assurance to them.
[00:07:58] Speaker B: Interesting. I never saw it as like a, it's like a social proof. I mean, I'm not sure social proof is like the right term, but in a way it's like we're so confident in like what we're doing and like the company we're working with as well is like very confident that we're actually going to get this done for you. To put it very simply.
[00:08:13] Speaker A: Yep, absolutely. It's a major piece of. It really is social proof. It's just the old school social proof that does exactly. That says, hey, somebody is standing behind me that says that we're okay.
[00:08:26] Speaker B: And like, I'm actually curious for more like federal like government oriented type like contract, is this something that's actually like required from like, like a provider? Like when I want to work with them?
[00:08:36] Speaker A: Yeah. When you work with the federal government, if the job is more than $125,000, then it's required. It's a rule under the Miller Act. States have passed similar rules for jobs that are over a certain size.
You're also seeing more and more private jobs where the government's not involved at all, have bond requirements. And the reason for that is exactly. We talked about you're hiring somebody now, you know they're going to finish this job because there's somebody standing behind them. It costs you just a little bit more, but you get the whole benefit of that company that's really solid and can get the work done on time. And you know, for most people, delays are way more costly than a little bit of a bond cost for their contractor.
[00:09:24] Speaker B: Yeah. And now that I'm getting my university class like surety bonds, it kind of sounds like, most people probably should have that by a default. Like, it should be standard practice that you have that with what you're doing. I mean, it's only like pros, to put it very simply.
[00:09:42] Speaker A: Yeah, it really is a great way to have a guarantee.
And so for many people, having a bond on a job makes sense.
So the weird thing is most people are used to residential real estate building and bonds are kind of rare there.
They do exist, but they're rare. But on the commercial side, we really recommend owners to do this. And so we have started working with a lot of people that build out, like, commercial real estate.
And we're saying get those people bonded because, you know, you know, being delayed by six months is not having tenants for six months. That's where all your cost is. It's not this extra couple of percent.
You know, for a normal person living in a house, they don't want to pay the extra couple percent because it's big money to them. But for commercial stuff, you know, you have a real business, you want people paying all along, you get that bond and stuff. And so we're seeing a lot of, of the people that are a little bit more cash flow savvy really move in that way.
[00:10:42] Speaker B: Yeah, because it affects their bottom line, like, very heavily if it doesn't end up being on time and there's like all these delays. So, I mean, it's like insurance, it's worth taking it. Like, I mean, it depends what type of insurance that you get. But in my experience, it's always worth it getting insurance because you never know what's going to happen. It's better to be safe. And it's like when you put your seat belt, you're like, hey, like, I don't think I'm gonna crash, but if I crash, then hopefully I'll be fine here. But one of the things I thought, one of the things I thought was interesting though is for like the different types of shirt bonds. There's a lot. There's like what I think I saw, like it was around like 25, 000, which I thought was like pretty wild. Like beyond just like the, the construction space. What are like some industries that use or like situation where a lot of business owners are either required to have it and they don't even know that, or it's like an industry that you see it like very often being used.
[00:11:37] Speaker A: Okay, that's a great question.
Yeah, we always throw out the $25,000 number.
Some people have estimated up to 35,000. And you know, that's gotta be a lot.
[00:11:46] Speaker B: Okay.
[00:11:47] Speaker A: The industry itself doesn't even know how many there are. So where we see this a lot is, you know, we've been talking about kind of contract bonds, but there's also what we call the license and permit bonds. People that need bonds for, you know, that, as I said that, you know, electrical, you know, contractor just needs a license bond. You see them for restaurants that need bonds to sell liquor, gas stations that use it to sell gas for distribution of fuel.
You mentioned cannabis early on. You have to. In order to sell cannabis in nearly every state, you have to have a bond to guarantee that you're paying, gonna pay your taxes.
You know, for pro, you know, court bonds, there are bonds, if you have a probate estate where somebody needs to make sure that they don't, you know, take all the money and, you know, as they say, abscond to Mexico.
You have to put up a bond. If you lose a case and you appeal it, there's a famous case last year where Donald Trump did this. He lost a case and had to put up a huge bond.
And so that was significant that finally somebody did for him.
So, you know, bonds just keep appearing in all these little different areas of the world. And many times it's just for small businesses. They come in, they get a bond from us. Sometimes they just see it. See it as pretty simple to get. And we try to make it simple for them, but it's all over the place.
[00:13:11] Speaker B: Yeah. Is there like, one industry in particular that you see? Oftentimes a lot of, like, business owners or contractor, different profession, doesn't really matter that they're like, oh, like, I needed this. Like, I didn't even know. And then maybe, maybe they come scrambling to you like, Gary, like, I need this. I didn't even know about it because I feel there's probably a lot of those types of situations.
[00:13:31] Speaker A: Tons of those. We see it in restaurants a lot. So people set up a restaurant, they don't realize they need a bond for one to pay their taxes, typically, and then two for if they're going to sell liquor, which, you know, most restaurants do.
So those are two that they need that they don't know about.
So those are the ones we see the most for. People are just super surprised unless they've been in the business a while.
[00:13:53] Speaker B: Yeah. Because, I mean, I wouldn't think a restaurant would need to get, like, bonds. Like, that's definitely not one of the first things I'm thinking about when you're setting up a restaurant. And I'm Pretty sure. Anyone listening that runs a restaurant or has a run one probably didn't think of that when they get it.
[00:14:07] Speaker A: Yeah, no, nobody does. And I'll give you a great example. I have a buddy who actually is in the surety space, right. He actually underwriter, owns a restaurant and had totally forgotten that they need bonds for their restaurant, even though he actually works in this stuff. So it just, it just surprises people all the time.
[00:14:26] Speaker B: Yeah, I mean, it's like you said, there's 25,000, but there's probably 35,000 people don't even know about. So it's like an industry that's like consistently evolving. You're finding out like new things.
I mean, for some people, I guess it's just like hitting them in the face like, oh, I probably should be getting a shirt bond when they just learn about it here. But just like shifting gears a little bit, going more to. With everything that's going on right now with tariffs, material cost, a labor shortage, how is that like all showing up in like the shirty bond like world? Are you seeing like more claims or contractors getting harder to bond? Like, what should people in more like the construction and like real estate like, be paying attention to right now?
[00:15:07] Speaker A: Okay, so let me answer the quick question is do we see people getting harder to get bonded? The answer to that short answer to that is yes. Right. So, you know, just the economy is not going as full guns as it was. There's also a secondary effect of people that had their student loans abated for a long, long time. Well, now that's being reported. Again, that's affecting their credit scores. And that is one of the components that many sureties look at.
So it is harder to get bonds. But the second part is what should people be looking at?
And there are a couple of reasons why bonds are so important because there are some material shortages that are starting to creep up.
So let's just take roofing for example.
Roofing has a tight constraint on supply currently.
And that's due to the hurricanes and things in Florida and North Carolina, you know, still from Katrina in New Orleans. I mean, just some of this, you know, build out. This is before the California wildfires. So that's going to constrain stuff more.
Plus now we have oil shocks, which affects shingles as well. So now we're going to have price escalations. Again, that's just a constraint on the system. So that's one thing you see for materials, for subs because of the changes in the immigration policy.
Right. We've seen Subs leave the industry. Right? Or just say they're just retiring, saying we're not going to deal with it or we can't find people or whatever else. So many times, you know, we see people getting bonds on jobs because what they're really trying to do is guarantee that the people that they hire, you know, their subs are good. Right? Because sometimes it's not your general contractor that you're worried about, it's that H Vac guy or the plumber or the roofer.
And you want to make sure that those people show up. Because we have had many reports in many different areas. Like in our local area there are a couple of just subcontractors that left the left altogether and that's left general contractors scrambling.
So that bond's kind of guarantee, hey, they're going to get your replacement quickly so that those bond penalties don't come in.
[00:17:27] Speaker B: Interesting. So for those, those people in that space, like roofing specifically, like it becomes okay, like I probably need one. Because everything that's going on with like labor and everything, maybe they're not going to show up, maybe they're not going to be doing the job and that it's basically, I mean like again, like the social proof, like reassuring, like say we have a very good company, we're in standing, we have a very good talent, like in house, like we're going to be delivering. There's a lot of companies that obviously they're hiring like a lot of subs and then maybe they're not going to be showing up, they're not going to be able to deliver, there's going to be delays. But it's like a, it's like a mark of like confidence. Like, hey, we can actually deliver.
We're backed by bonds. Like we actually will do this properly. And I think this even becomes a differentiator for companies. Like is this something that you see often with like clients where it's like, hey, we have like, we're obviously backed, we have shirty bonds. Like this is a social proof factor. Like I know in construction and everything like that, as you mentioned, that's like a big one, especially for like commercial jobs, roofing, etc. But is there any other like common industry that you find yourself. You're like, hey, that's a very good social proof. Like any people in there.
[00:18:31] Speaker A: Yeah, construction is the most common and that's the one where we actually see it being more and more available to people. And this is where the private people are coming into play and why we're seeing that expand is that they're going in and saying, look, we can't afford a year delay, so we need bonds to guarantee that things are getting done.
And that, you know, as part of that, the underwriting has changed so that we don't just ask questions of the particular company.
Many times we're saying, hey, you know, do you have people already in place? Not are you going to hire people? But, you know, are they already there? And that, that's. That's a difference, right? Some people are like, well, we'll hire. And that's. That's good thinking. That's a lot different than saying, I have a crew identified for this job.
And so that's changed how, you know, the underwriting has been done. And quite frankly, it's led to a lot of people not bidding on jobs because they didn't have crews identified.
And it's also led to, you know, larger clients or larger companies vetting their subs through bonds, knowing that, hey, they actually have this available and they. And could do the job.
[00:19:42] Speaker B: Yeah. And I feel that ends up being like a plus for, like, any, like, customer people that those people are working with because you're. You're guaranteeing good work being done. You're guaranteeing that there's not going to be any delays. You're making sure that you have a crew in place that you're not going to be scrambling on to try to get people that might be able to do the job correctly. It's like, okay, we have the entire team, like, we're going to crush it for you. We're going to do an amazing job, like, you should be working with us. And it's, it just allows that the company that are actually doing good work to get rewarded for doing good work. And obviously backing that up with, like, surety bonds here, which I think is going to be interesting.
[00:20:16] Speaker A: And we see a lot of repeat jobs because of that. So we have clients that will just get repeat jobs over and over and over because they do good work and they're bonded. They know they're doing good work. And so those large general contractors keep hiring those same folks, you know, because you have high reputation. But, you know, it's. Bonds lead to that as well.
And so, you know, they know, hey, I can just get it done this way. Yes, it may cost a little bit more, but I don't care. I need the job done. I'm moving to the next job. That leads to increased velocity. So a slightly smaller margin, if you have more velocity is worth a lot more.
[00:20:52] Speaker B: I love that I'd be curious. Gary, anything, any like pointers, tips, advice that you would have for like anyone else? Like hey, not sure if I needed some surety bonds. Should I be looking into this? Any advice or anything like that that you have for business owners, contractors or developers or anything like that when it comes to just making sure that they have everything in check, whether they need to get some insurance, whether they need to get some surety bonds. Any parting words of advice that you have for those people?
[00:21:20] Speaker A: Yeah, I always think it comes back to a business decision. And so as I tell people the problem with surety bonds is that it's a paperwork intensive business. Right. So I tell people it's not anything but paperwork. However, once you get over that little hurdle, what we find is that from a developer perspective, they like bonds because they can get their stuff done. From a contractor perspective, they like bonds. One, it's social proof that they can do it. And then two, they can also bid on government jobs where there's higher margins. Right. And so we find that when our clients start bidding on work, they never stop because they like those additional margins. Plus they can also use that as proof to everybody else, hey, we do good work.
And then for all of everybody else that's, hey, we like bonds because it guarantees that we're moving forward and we're not gonna hit those sticking points.
And what we don't wanna have is that 60, 90, 120 day Lowell. And that's where a lot of problems come in. So it just kind of smooths things out for everybody.
[00:22:26] Speaker B: I love that. Well, Gary, I really appreciate you coming on the show and educating us because I'll be honest, you, I didn't have too much of an idea exactly how shirt evolence and everything work. I think I have a better idea now and I hope your listeners will get that same feeling and experience here. But for anyone that wants to get in touch with you or they're like, hey, like I think I need like a shirt he bonds, like where should be. They're looking at how they should be getting in contact with you here.
[00:22:50] Speaker A: Yeah, absolutely. So yeah, they can get a hold of us. We've got our website, swiftbonds.com and access-surety.com we're also on all of the, you know, socials and we're more than happy to just talk to people about bonds. You know, we do a lot of education for our clients and prospective clients and just people we like to talk to.
And so more than happy to just get on the phone and chat with you about.
[00:23:13] Speaker B: I love it. So we're going to put that in the show notes. If anyone wants to reach out directly, get in touch with Gary, they can obviously do that here. But your listeners, if you've enjoyed this episode, make sure to leave a like, subscribe, leave a review, comment, all that fun stuff. Really appreciate you tuning in here and in. Until then, keep pushing and we'll see you in the next one.
