What Is the SBA Small Business Bond Guarantee Program?
The U.S. Small Business Administration (SBA) helps entrepreneurs launch and grow their small businesses by connecting them with lenders and funding. The SBA Surety Bond Guarantee Program gives small contractors the backing they need to qualify for surety bonds.
If you get denied for a construction bond, you can request SBA backing. The SBA’s financial guarantee helps bolster your application so you can bid on larger projects.
Currently, the SBA backs the following contract bond types:
How Do You Apply for an SBA Small Business Bond?
Start by applying for the construction bond you need with an SBA-approved provider — like SuretyBonds.com. We’ll see if you are eligible for a standard market bond first. If there is no available market, your account manager will help you explore SBA-backed options
You’ll need to provide more in-depth details and documentation for your SBA contract bond application, making it a lengthier process. But don’t worry — our expert team is here to simplify the process and provide exceptional service along the way.
Call us at 1 (800) 308-4358 with any questions or start your online application today.
SuretyBonds.com — an SBA-Approved Surety Provider
SuretyBonds.com is proud to be an authorized agent of the SBA Surety Bond Guarantee Program. Apply now to see if you’re eligible for an SBA bond with us!
What Are the SBA Bonding Requirements?
There are three basic eligibility requirements for obtaining an SBA surety bond:
- Be a small business: You must meet the SBA size regulations for small businesses in your industry.
- Have a ‘small’ contract: The contract size must be under $9 million for non-federal projects and under $14 million for federal contracts.
- Pass the surety’s evaluation: Once the SBA approves, you must also meet the surety’s underwriting requirements.
How Much Do SBA Bonds Cost?
SBA bonds typically cost around 3.6% of the total bond amount. There are two fees involved in this rate:
- SBA Guarantee Fee: 0.6% of the total bond amount
- Bond Premium: Starts at 3% of the total bond coverage
While the SBA guarantee fee is always 0.6% of the bond amount, the exact bond premium is determined through underwriting and is based on the bond type and amount.
Bid bonds are an exception and are typically issued for just $100 with no SBA fee.
Surety underwriters will look at the job at-hand, work history, personal credit and business financials to determine your premium.
Which Parties Are Involved in SBA Bonding?
Small business association guarantee surety bonds create a contract between three parties:
- Principal: The bonded contractor who purchases the bond
- SBA-Backed Surety: The company that issues the bond to the principal
- Obligee: The agency or company that requires the bond
Who Should Get an SBA Bond?
Any contractor business struggling to get approved for construction bonds should consider the SBA surety bond program. Some specific situations include:
- Businesses with limited work history
- Businesses with poor credit
- Businesses with limited financial resources
- Businesses or startups under three years old
If you align with any of these examples, this bond program can help you win contracts and grow your business. In doing so, you’ll also improve your likelihood of getting approved for future contract bonds on your own.
