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SBA Bond Guarantee Increases to $6.5 Million

A major revision to the U.S. Small Business Administration’s (SBA) Surety Bond Guarantee (SBG) Program more than triples the eligible contract amount–from $2 million to $6.5 million–the agency will guarantee on surety bonds for public and private contracts. The higher surety bond guarantee limits are expected to help construction and service sector small businesses gain greater access to private and public contracts, as well as secure larger contracts vital to small business growth.

“These new contract ceilings are one more way we can help small businesses, particularly in the construction and service sectors, compete for and win critical contracting opportunities that help them grow their businesses and create jobs,” SBA Administrator Karen Mills says. “Additionally, these changes, which are enthusiastically supported across the surety industry and small business community, will help spur economic growth and recovery in areas that have been hard hit by disasters, bringing jobs and economic activity to regions at a time when it is needed most.”

The revisions are a result of the Fiscal Year 2013 National Defense Authorization Act and are expected to bolster participation by surety bond agents and brokers and their surety companies in SBA’s SBG Program.

The changes also allow the SBA to guarantee bonds for government contracts valued up to $10 million if a contracting officer of a federal agency certifies that the guarantee is necessary for the small business to obtain bonding, and that it is in the best interests of the government.

The SBA partners with the surety industry to help small businesses that otherwise would be unable to obtain bonding in the traditional commercial marketplace. Under the partnership, the SBA provides a guarantee to the participating surety company of between 70 and 90 percent of the bond amount if a contractor defaults or fails to perform.

According to Lynn Schubert, president of The Surety & Fidelity Association of America, “SFAA and its members believe that it is important to have a viable bond guarantee program at the SBA and are pleased with the provisions in the legislation that increase the bond guarantee ceiling. The provision that would prevent the SBA from retroactively denying previously approved bond guarantees when sureties make claims will go a long way in restoring industry confidence in the SBA bond guarantee program.

“The SBA’s new bond guarantee ceiling of $6.5 million is far more reflective of the sizes of prime contracts for which many small contractors are seeking bond credit today,” Schubert says. “Both of these changes will add to the responsiveness and underwriting flexibility of our member companies that participate in the SBA bond guarantee program.”

SBA assistance in locating a participating surety company or agent, and completing application forms, is available online.  For more information on the SBA’s SBG Program, including surety office contacts, call (800) U-ASK-SBA or visit http://www.sba.gov/osg/.

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