Small Business Questions & Answers


Filed under Finance

Ask About Surety Bonds for Construction Firms

by Seeking Help | May 20, 2012

Subject :Finances

Dear Toolkit,

I'm sure my small construction business could do some government sub-contracting work during this recession period if only we had access to adequate surety bonding. Do you know of any source willing to deal with small contracting and service businesses? I've looked everywhere to no avail.


Seeking Help

Dear Seeking Help,

Fortunately, the U.S. Small Business Administration (SBA) partners with the surety industry to help small businesses that would otherwise be unable to obtain bonding in the traditional commercial marketplace.

Under this partnership arrangement, the SBA provides a guarantee to the participating surety company of between 70 and 90 percent of the bond amount. Under a related provision of the Recovery Act that was implemented in March 2009, the SBA was authorized to provide bond guarantees up to $5 million through September 2010 on all public and private contracts and subcontracts.

And as of July 23, 2009, the SBA can provide surety bond guarantees on federal contracts valued at up to $10 million, if the business qualifies and the contracting officer certifies that the guarantee is in the best interests of the government.

Through its Bond Guarantee program, SBA will also help by guaranteeing bid, payment and performance bonds to protect the project owner against financial loss if a contractor defaults or fails to perform.

For help in locating a participating surety company or agent, and completing application forms, go to the SBA's Surety Bond Guarantee Program.