If you write surety bail bonds, your build-up fund, or BUF, is one of the most important and least understood parts of your agreement with your MGA. Good BUF terms can mean the difference between a business that grows and one that's always short on cash.
What a BUF is
A build-up fund is a reserve built from a portion of each bond you write. It's held as collateral against losses, mainly forfeitures you can't resolve. Over time the fund grows with your book of business, which protects the carrier, the MGA and you.
Why BUF terms matter
Every dollar in your BUF is a dollar that isn't in your operating account. The terms of your BUF agreement decide:
- How much is held per bond. A higher rate grows the fund faster but leaves you with less cash.
- Whether there's a cap. Some agreements stop collecting once the fund reaches a set level.
- How losses are charged. Know exactly when and how forfeitures are paid out of the fund.
- When and how it's returned. Find out what happens to your BUF if you retire, change MGAs or your liability is exonerated.
- Transparency. You should be able to see your BUF balance and activity whenever you want.
Questions to ask any MGA about its BUF
- What percentage or amount is withheld per bond?
- Is there a cap on the fund, and what happens when I reach it?
- How are forfeiture losses charged against the fund?
- How often will I get BUF statements?
- What is the process and timeline for releasing my BUF if I leave?
Get the answers in writing before you sign anything.
The Bobcat Surety approach
Agents tell us our BUF terms are a big reason they switched to Bobcat Surety. We keep the terms clear, fair and built to help your business grow, and we'll explain them line by line before you commit. Contact us or call (866) 662-8337 to talk through your situation.