- Simplifies BEAD application, replacing costly letters of credit
- Ensures the timely and proper project completion
- Perfect for small to mid-sized internet service providers
- Guarantees adherence to BEAD program terms & regulations
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For subgrantees deploying network facilities under the Broadband Equity, Access, and Deployment (BEAD) program, 2024 has seen a change to the application process. As announced by the National Telecommunications & Information Administration (NTIA) of the U.S. Department of Commerce, this change will allow companies to avoid acquiring Letters of Credit (LoCs) and instead turn to BEAD surety bonds as a form of financial assurance.
This is a significant step forward, particularly for smaller companies who often struggle to meet the demands of LoCs. So, with decades of experience in supplying surety bonds across every industry, we want to explore how your company can access these bonds, what it's likely to cost and the requirements you will need in order to apply. Read on to learn more and trust our know-how to bring you the information you need.
Who Needs to Get Bonded?
Put simply, any company that wishes to participate in the BEAD program now has the option to get bonded. This means that a broad range of organizations tasked with expanding “high-speed internet access by funding planning, infrastructure deployment and adoption programs” should consider the benefits of BEAD surety bond.
Examples of the kind of companies that can benefit from BEAD surety bonds include:
- Small to mid-sized ISPs (internet service providers)
- Regional telecommunications companies
- Municipal broadband projects
- Start-up broadband providers
- Nonprofits promoting digital equity
In all but the largest companies, the introduction of BEAD bond options is a welcome update to the application process. LoCs are notoriously difficult to secure, requiring a significant amount of liquid assets or collateral alongside strict application conditions.
However, because of the nature of the industry and its various moving parts, there are two separate situations that will dictate exactly who needs to be bonded.
- If the ISP (the subgrantee) can qualify for bonding, they should present the bond directly to the state broadband office (the grantee). In this situation, the ISP is the bonded principal, and the obligee (state broadband office) is the entity that is protected. This bond secures only system construction and not other obligations that may be present in the award agreement.
- If the contractor to the ISP that is building out the broadband system is better suited to qualify for bonding, then the contractor should present the bond for the benefit of the ISP and the state broadband office. In this situation, the construction contractor is the bonded principal, and the dual obligees are the entities that are protected. This bond secures the work detailed in the contract between the ISP and the contractor.
How Much Does a BEAD Program Surety Bond Cost?
As with any surety bond, the cost of your surety bond will be a percentage of your bond amount, ranging between 1% and 10%.
When using a performance bond in place of a LoC, the bond amount must be 100% of the sub-award amount, when work begins.
The good news, especially for smaller companies, is that the bond amount can be reduced upon achieving deployment milestones, which will ultimately translate into lower bond costs as elements of the contract are completed.
For example, if your company receives a sub-award of $1,000,000 in Kentucky, the penal amount of your surety bond will be $1,000,000. Assuming a premium that’s 2% of that value, you’d be paying $20,000 for your surety bond. Upon completing 40% of the contracted work and proving this completion to Kentucky’s Office of Broadband Development, the penal amount of your surety bond will decrease to 60% of the sub-award amount, which is $600,000. If the 2% rate stays the same, the cost of your surety bond goes down to $12,000.
Reaching subsequent milestones will reduce your bond amount even further.
Being a leading supplier of performance surety bonds across a huge range of industries and sectors, we’re perfectly placed to provide the best rates for BEAD surety bonds.
How to Get a BEAD Program Surety Bond
While this is a brand new bond on the market, we are highly experienced in advising our clients on how to apply for performance bonds. Below, we cover the main steps you will need to complete when acquiring a BEAD bond.
1. Apply For Your Bond
Firstly, you will need to apply for your bond by filling in a bond application which will include detailed information about your company and the subgrantee agreement. You will also need to include details about your financial standing. Generally, you should expect to provide the following information:
- Company Information — Legal name, address, and contact details.
- Project Details — Description of the project, scope, timeline, and budget.
- Financial Documentation — Recent financial statements, credit reports, and other relevant financial information.
2. Get a Quote
After submitting your application, we will review the information and assess the risks associated with issuing the bond. Based on this assessment, we will offer our best possible quote, which outlines the premium rate and terms of the bond. This step may involve:
- Risk Evaluation — Analysis of your credit history, financial stability, and project feasibility.
- Quote Issuance — Provision of a detailed quote, including the premium rate and any conditions or requirements for the bond.
3. Purchase Your Bond
Finally, you will need to purchase the bond itself by paying the bond premium. Once you have paid the premium, your surety bond will be granted and you can continue with the BEAD program application. Key steps include:
- Agreement Signing: — Finalizing the contract with the surety bond provider.
- Premium Payment — Paying the initial premium amount as specified in the quote.
- Bond Issuance — Receiving the official surety bond document, which can then be submitted as part of your BEAD program application.
BEAD Program Surety Bond Requirements
For any subgrantee choosing a surety bond in place of the LoC, it is crucial to remember that this particular bond is needed during the BEAD program application process and must be in place before entering the subgrantee agreement.
This demonstrates your financial commitment and reliability, as well as serving as a guarantee that the project will be completed in accordance with the terms of the subgrantee agreement. This includes meeting all deadlines, maintaining project quality, and adhering to budget constraints.
In addition, the surety bond ensures that the subgrantee complies with all relevant federal, state, and local regulations, as well as the specific requirements of the BEAD program.
For more information on how Lance Surety can help you secure your BEAD bond, contact us today.
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Quick response times and turn around for issuing bonds. Great customer service and very knowledgeable. We have used Lance Surety multiple times and have never been disappointed. Highly recommend them and Collette!
Long story short, these guys cut through the B.S. and get the job done. Responsiveness, excellent! Communication, excellent! Respect for their industry partners, excellent! John, Collette, Ryan, you're all-stars! Thank you!
We decided for Lance Surety Bond's quote for 2 reasons; Price and Customer Service. Our Representative Ryan was just SUPERB!! [...] I highly recommend Lance Surety Bond for all your Bonding needs! I'll definitely come back for all of mine. :-) Thanks Ryan!
Quick response times and turn around for issuing bonds. Great customer service and very knowledgeable. We have used Lance Surety multiple times and have never been disappointed. Highly recommend them and Collette!
Long story short, these guys cut through the B.S. and get the job done. Responsiveness, excellent! Communication, excellent! Respect for their industry partners, excellent! John, Collette, Ryan, you're all-stars! Thank you!
We decided for Lance Surety Bond's quote for 2 reasons; Price and Customer Service. Our Representative Ryan was just SUPERB!! [...] I highly recommend Lance Surety Bond for all your Bonding needs! I'll definitely come back for all of mine. :-) Thanks Ryan!