Surety Bond Guarantee Program for Small Contractors

The Small Business Administration (SBA) has developed a Surety Bond Guarantee Program in order to provide smaller contracting firms with assistance in obtaining surety bonds.  This program was designed to help small contractors with less experience have an opportunity to become bonded so that they may compete for jobs requiring surety bonds.  The program will allow these smaller companies to prove their ability to meet job specifications, and perform well while making a profit.  Strong performance with the help of this program can enable less-experienced contractors to build credibility, which could help them acquire surety bonds for future jobs based alone on their company’s proven ability to perform, as well as their financial strength.

Does this program apply to all surety bond types?

No.  The SBA’s Surety Bond Guarantee Program can only be used for obtaining surety bonds classified under the contract bond umbrella.  However, other types of surety bonds, such as license and permit bonds, may be authorized as well, as long as they are written in conjunction with a contract bond.

So how does this program work?

The SBA does not write surety bonds for eligible companies, but instead guarantees to reimburse participating sureties for a specified portion of any losses incurred as a result of a small contractor’s breach of contract (i.e. 70-90% of losses).  Participating sureties must also pay the SBA a fee for using their backing to guarantee all bonds written via the Surety Bond Guarantee Program.  In the unfortunate event that a claim against someone bonded under this program, the SBA must be notified in a timely manner.  The participating surety is responsible for handling all aspects of a claim before seeking reimbursement from the SBA.

For more information on how to apply for the SBA’s Surety Bond Guarantee Program, click the following link:  http://www.sba.gov/aboutsba/sbaprograms/osg/OSG_HOWTOAPPLY_SBOND_GUARANTEE.html.