In efforts to support the growth of emerging contractors with limited experience and financial strength, and to increase the opportunities available to those contractors in the federal sector the Small Business Administration created the SBA Surety Bond Guarantee (SBG) program. Under the program, the SBA indemnifies a surety company for a specific percentage of a loss due to a surety bond claim under a bid bond, performance bond and/or payment bond. Surety companies are more likely to offer capacity to a contractor that would not ordinarily meet the surety's minimum standards for qualification. The Office of Surety Guarantees (OSG) offers access to the program through authorized surety agents between two plans:
Prior Approval Program (Plan A)
Preferred Surety Bond (PSB or Plan B)
It is important to note that the SBA's performance bond guarantee plans to NOT necessarily make an unbondable contractor "bondable". Per the SBA, "A surety must agree to use standards generally accepted by the surety industry in underwriting bond applications. These standards and must be used on both SBA and non-SBA guaranteed bonds." Before a contractor may apply for a bond guarantee through the program, it must fall within specific criteria for small businesses:
If a contractor falls within the criteria for the SBA performance bond program, an appropriate application must be made through a surety agent that has been approved by the SBA for submissions. Understanding the underwriting process is important for a contractor that contemplates participation. Open lines of communication with the surety agent will be helpful in this understanding the process and will establish a working relationship which is vital to success of a bonded work program. We offer some informative documents to assist in a new applicant's orientation here. An initial application submission will require the contractor to provide at minimum the items in the "application" box on this page. Once the preliminary underwriting has been completed and the surety agent is able to offer an affirmative "prequalification", the SBA will require completion of the following:
Competitive environment, climatic changes, the volatility of material and equipment costs, the cyclical nature of the industry, scarcity of a qualified and dependable labor force, and the softening/hardening of credit terms are significant risks that each contractor must manage. A contract surety bond company understands all of these and will be prepared to offer the performance bond capacity appropriate for the particular contractor. Over-extension is a big danger to emerging contractors as well. A performance bond underwriter assesses a contractor's capital position, talent, experience, maturity and overall character carefully. For these reasons the relationship between a contractor and surety underwriter must be cordial, honest and realistic. A contractor must be told what he "needs" to hear, rather that what he "wants" to hear to enhance his or her success with bonded work.
National performance bond leader, Surety One, Inc. is a SBA approved underwriter for the SBA Bond Guarantee Program, international insurance brokerage and surety-focused managing general agency licensed in all fifty states, Puerto Rico, U.S. Virgin Islands, Canada and Dominican Republic. Call (800) 373-2804, email Underwriting@SuretyOne.com or click here for more information about a performance bond guaranteed by the SBG program or information about any surety bonding need.
Surety bond application review and quoting are free of charge. There is no obligation to purchase.