Surety Bond Guarantee Program
What Does Surety Bond Guarantee Program Mean?
The Surety Bond Guarantee (SBG) Program is a federal initiative administered by the U.S. Small Business Administration (SBA) to help small and emerging contractors secure bid, performance, and payment bonds. It guarantees bonds for contracts worth $6.5 million or less (or up to $10 million for federal contracts), allowing businesses that might struggle to obtain surety bonds to compete for projects.
Insuranceopedia Explains Surety Bond Guarantee Program
How the Surety Bond Guarantee Program Works
The SBA partners with approved surety companies to guarantee a portion (typically 80-90%) of a contractor’s bond. This reduces the risk for surety companies, making them more likely to approve small businesses that might not qualify on their own.
Who Is Eligible?
To qualify, contractors must:
- Meet the SBA’s size standards for small businesses
- Have a sound financial record and demonstrate the ability to perform the contract
- Be unable to obtain bonding through conventional means
- Have a contract valued at $6.5 million or less (or $10 million for federal contracts)
Key Benefits of the SBG Program
- Increased Contract Opportunities – Small businesses can bid on larger projects that require bonding.
- Stronger Business Credibility – Being bonded improves trust with clients and project owners.
- Reduced Risk for Sureties – SBA guarantees a portion of the bond, encouraging approval.
- Faster Bond Approval – Some applications receive approval within days.
Types of Surety Bonds Covered
The Surety Bond Guarantee Program covers the three most common construction bonds:
- Bid Bonds – Ensure that a winning bidder will follow through and provide necessary contract bonds.
- Payment Bonds – Guarantee that subcontractors and suppliers are paid.
- Performance Bonds – Ensure that the contractor completes the project as agreed.
How to Apply
Businesses can apply for the Surety Bond Guarantee Program through SBA-approved surety agencies. The process involves:
- Submitting financial statements, past contract history, and a business profile.
- Working with a participating surety company.
- Receiving a bond backed by the SBA guarantee.
Final Thoughts
For small businesses looking to compete for bonded projects, the Surety Bond Guarantee Program is a game-changer. By reducing financial risk for surety providers, it opens doors to larger contracts, fostering growth and expansion in the construction industry.
