Assistance Programs for Surety Bonds

Published by admin | Filed under Bonds

As a contractor, one of the first things you must do to establish yourself and become competitive in your new business is become bonded and licensed. Surety bonds are a critical part of any new contractor business as they provide your potential customers with a measure of confidence in your abilities and trustworthiness. After all, a surety bond’s whole purpose is to protect the homeowner from contractor error or default—if a bonded contractor cannot complete a job, the bonding company steps in with financial compensation or will, in some cases, find someone else to assume the work.

Obtaining a surety bond is usually a straightforward process if you have good credit. Generally, your insurance company can issue the bond and will do so after a credit check and a review of your finances, relevant experience, etc. If you do happen to have poor credit, there are bonding companies who can provide bonds to you, but be aware that the interest rate you’ll pay is slightly higher than those with good credit will pay.

But what if you’re still having trouble obtaining your bond because you’re a newer or smaller company? Thankfully, the Small Business Administration is able to help. By issuing a guarantee for bonds for contractors who are just beginning or just starting out, the SBA encourages surety companies to provide bonding for these contractors. In turn, getting that first surety bond can give a contractor a huge boost in the future by allowing them more opportunities to get bonds in the future as well as more contracting opportunities.

The SBA will guarantee bonds for contracts for up to two million dollars and will cover three types of surety bonds (bid bonds, performance bonds, and payment bonds) for smaller contractors, as well as those just starting out. In order to take advantage of the SBA guarantee program, contractors need to qualify as a small business and meet the surety bonding qualifications. Construction businesses (and those in the service industry) meet the SBA standards for the bond guarantee if their average yearly receipts do not exceed $6.5 million.

If you are having trouble obtaining a surety bond, it’s critical to keep trying— in today’s market, a bond can absolutely mean the difference between success and failure as a business. The SBA’s program in particular is an extremely beneficial one. For more information on the SBA guarantee, please see the SBA’s website at www.sba.gov