The Small Business Administration (SBA) Surety Bond Guarantee Program
Presented by: Michael Regan
Did you know that the SBA, the federal organization that assists small businesses, will guarantee bid, performance or payment bonds issued on behalf of a small business by a surety company?
The guarantee program was implemented in an effort to help small construction businesses grow and share in the construction dollars expended by the federal government. However, the progam is not limited to federal work. They will issue guarantees on contracts at the state, municipal and private levels too.
Surety companies are conservative by nature. They want to bond construction companies that they know will be successful. However, there are many good contractors who may have some roadblocks to getting surety bonding. It may be because they are relatively new or lacking in financial capital. In these instances the SBA, after performing their own due diligence, can agree to issue a 90% guarantee to the surety of the bonds they issue.
The SBA also offers a cost neutral effort. The “fees” charged the contractors for the guarantees cover the cost of administering the program and funding the cost of any guarantees that are paid out.
The program has been very helpful to small, inner city contractors who may have limited, if any, access to standard surety.