The Small Business Administration is increasing its statutory contract limits for the Surety Bonds Program. This change is expected to increase revenue opportunities through small businesses contracting, thus supporting job creation and economic growth. The SBA has agreed to guarantee bid, payment, and ancillary bonds up to $14 million for federal contracts. Thus, the surety bonds will help small businesses win federal contracts by offering the customer a government-backed guarantee that the work will be done on time.
SBA Guarantees Surety Bonds for Small Businesses
The Surety bonds can help small businesses win business contracts by providing a guarantee to the customer. Many private and public contracts require surety bonds that the surety companies generally offer. The Small Business Administration offers surety bonds for some surety companies, that help small businesses, even if they need to meet the criteria for other sureties.
- Surety bonds are requested by some contracts, ensuring that the work is properly bonded.
- The authorized surety companies will partner with the business to offer surety bonds to the business that meets their qualifications.
- SBA guarantees these surety bonds for private surety companies so that many small businesses would qualify for these bonds.
- Thus, small businesses now get SBA-guaranteed surety bonds to get more contracts and projects.
Categories of Work that SBA Surety Bonds Cover
Some businesses and business contracts would require surety bonds that cover certain situations. The SBA thus guarantees surety bonds that cover several major categories of work, and these are as follows.
- Bid: Businesses that deal with bidding would ensure full payment along with performance bonding from the contract bidder.
- Payment: These contracts would ensure complete payment for the suppliers and the subcontractors.
- Performance: These businesses would ensure the full completion of a contract by small businesses.
- Ancillary: Ensures completion of business requirements outside of performance and payment, such as business maintenance.
All performance and payment bond guarantees would be required to pay a fee of 0.6% of the contract price to the SBA. If in case the bond is not issued, or is cancelled, then SBA would return the guarantee fee. SBA does not charge any fees for bid bond guarantees.
Surety Bonds Eligibility Criteria
A lot of economic opportunities are created for small businesses in the United States, and surety bonds are an important component of accomplishing the work. However, small businesses must check their level of eligibility before obtaining a surety bond. The following are the criteria that ensure business eligibility.
It is important that the business be small and compile with the business size standards given by SBA. The business should enter a small contract of value of $6.5 million in case of non-federal contracts and up to $10 million for federal contracts.
The business should pass the evaluation criteria. It has to make sure that it meets the credit score laid by the surety company and also fulfills its capacity and character requirements.
Statutory Increases for Surety Bond Guarantee Program by SBA
The SBA surety bonds help small businesses win federal contracts by helping them offer work-related guarantees to their customers. Thus, the SBA remains committed to helping small businesses to compete for and win these contracts. The SBA helps small businesses by guaranteeing performance, payment, bid, and maintenance bonds that the participating surety companies issue. Apart from these large contract bond guarantees, the SBA also offers simplified surety bond applications under its Quick bond guarantee application and agreement with limited paperwork and surety approvals within hours of application.