The Small Business Administration's Surety Bond Guarantee (SBG) Program is a partnership between the federal government and the surety industry to provide bonding to small and emerging companies.
“Small contractors seek bonding assistance from SBA because they may not meet the surety's standard underwriting requirements,” says Barbara Brannan, special assistant, Office of Surety Guarantees for SBA. “Many small contractors have the technical skills and knowledge, but they lack the experience and financial strength to obtain bonding. SBA's guarantee gives sureties the incentive to provide bonds for these contractors.”
If the contractor fails to successfully comply with the contract terms, the surety assumes responsibility under the bond and makes sure the contract is completed. SBA guarantees the bond and reimburses its guaranteed percentage of losses and expenses incurred by the surety if the contractor defaults. Construction and service contractors are eligible for the program if their average annual receipts for the past three years, including any affiliates, don't exceed $6 million.
These contractors must also meet the bonding requirements of the surety companies, which include credit, capacity, and financial considerations.
To qualify, contractors must contact an agent of a participating surety company. SBA can guarantee bonds for contracts up to $2 million.