Surety bonds help small businesses win construction, supply, and service contracts by providing the customer with a guarantee the work will be completed. Many contracts require surety bonds, which are offered by surety companies. Becoming bondable is like applying for bank credit. The requirements include a review of the technical and managerial ability, financial statements, and credit resources of the small business. Small businesses often struggle to meet some (or all) of the minimum qualifications.
Did you know there is a program to help small businesses get started with bonding or increase their current bonding capacity?
The U. S. Small Business Administration (SBA) provides an incentive for surety companies to help small and emerging businesses who have the knowledge and skills necessary for success but lack the experience or financial strength to obtain bonds through regular commercial channels. Eligible small businesses can receive the bonding assistance necessary to compete for contracting and subcontracting jobs through SBA’s Surety Bond Guarantee Program.
SBA guarantees bid, performance, and payment bonds issued by participating surety companies and reimburses the surety a percentage of loss if the small business defaults. This government guarantee allows sureties to write bonds for small businesses who otherwise would not meet their minimum standards, providing these businesses with access to contracting opportunities at bond rates typically less than 4 percent.
For a small business to be eligible, they must meet the following requirements:
- Be a small business according to the SBA’s size standards
- Have a small contract (not to exceed $6.5 million for non-federal contracts and $10 million for federal contracts)
- Pass the surety’s evaluation of the credit, capability, and character requirements
Small businesses that benefit from SBA’s bond guarantees are often:
- Startups and firms in business less than three years
- Businesses with credit issues or internally prepared financial statements
- Subcontract trades with a desire to establish their own bonding as a prime contractor
- Those wishing to increase their current bonding limits
Perhaps this is a program that could help YOUR business! For more information, contact Iowa’s SBA Surety Bond Guarantee Program specialist, Tamara Murray, at email@example.com or (303) 927-3479, or your CIRAS government contracting specialist, who will be glad to assist you!
Mary Zimmerman can be reached at firstname.lastname@example.org or 515-450-1278.