The U.S. Small Business Administration’s Surety Bond Guarantee (SBG) Program is designed to help small and emerging contractors secure the surety bonds they need to compete for public and private projects. Many small businesses struggle to qualify for traditional bonding due to their limited financial history or lack of experience. The SBG Program offers a valuable solution by partnering with approved surety companies to guarantee a portion of the bond.

In this article, we’ll explain what the Surety Bond Guarantee Program is, outline its key benefits and eligibility requirements, and walk you through the application process. You’ll also find links to official SBA resources and discover how to connect with companies that can help you navigate the SBG Program and grow your contracting business.

Who Is Eligible for the SBA Surety Bond Guarantee Program?

The SBG Program was established in 1971 and is run by the Small Business Administration. It helps smaller businesses qualify and win public and private contracts by assisting them in obtaining the required Contract Bonds. The SBA does not issue the surety bonds or any other types of bonds but serves as an intermediary between the principal (the construction firm that needs the bond) and the surety company.

Eligible contractors include small construction companies, start-ups, and those with limited or poor credit history. Because surety companies consider these entities a higher risk, the SBG Program guarantees that the surety company will be paid up to 90% of any unpaid bond claims.

Eligibility Requirements

  • Be a small business: Must meet the SBA size standards, which vary by industry and are generally based on the number of employees or the amount of annual receipts the business has. The average annual revenue cap currently for general contractors is $45 million or less; for specialty trade contractors, it’s $19 million or less.
  • Have a small contract: The SBG Program works with bonds up to $9 million for non-federal contracts and up to $14 million for federal contracts.
  • Pass evaluation standards: Meet the surety company’s credit, capacity, and character requirements.

Types of Surety Bonds Covered by the SBA SBG Program

Bid Bonds

Bid Bonds guarantee the winning contractor of a project will enter the contract and provide the required final bonds. If the selected contractor backs out, the surety may cover the difference between the winning bid and the next lowest (up to the bond amount) and, in some cases, the owner’s re-bid costs.

Performance and Payment Bonds

Performance Bonds ensure that the project is completed as agreed upon in the contract between the contractor and the property owner or public agency. If the contractor defaults, the surety can finish the work, hire/tender a replacement contractor, or pay the owner up to the bond’s penal sum.

Payment Bonds protect against unpaid subcontractors and suppliers. If the contractor fails to pay, the surety covers valid claims, ensuring that subs, suppliers, and laborers are paid, thereby helping to shield the owner from liens and payment disputes.

How to Apply for the SBA Surety Bond Guarantee Program

Required Documentation

You need to provide the following documentation to the surety agent and SBA, including: 

  • Financial Statements: Your company’s financial records
  • Contractor’s Questionnaire: A questionnaire providing detailed information about your business
  • Work in Progress Schedule: A schedule outlining the status of your current projects
  • Personal Financial Statement: A financial overview of your personal assets and liabilities
  • Bank Reference Letter: A letter from your bank providing a reference for your business
  • Bond Guarantee Agreement: An agreement outlining the terms of the guarantee
  • General Indemnity Agreement: An agreement whereby you agree to be responsible for any losses incurred
  • Contract Information: Details and specifics of the project you intend to bond
  • Other Documents: Evidence of past bankruptcies (if applicable) and any payment agreements for unpaid taxes to government agencies

Application Process and Timeline

There are two program types under the SBA SBG Program:

  • Prior Approval Program: The surety must get SBA approval before issuing the bond; SBA covers up to 90%.
  • Preferred Program: Sureties are pre-approved to issue SBA-guaranteed bonds directly; SBA covers up to 80%.

To apply for the SBA Surety Bond Guarantee Program, you must contact an SBA-authorized surety agent who will assess your eligibility and provide the necessary application forms, including SBA Form 994. You will need to provide financial statements, details about the contract, and information on your company’s work experience. After submitting your application through the agent, both the surety and the SBA will conduct underwriting.

Approval for the application varies depending on the program. It can be as little as 24 hours.

Key Benefits of the SBA Surety Bond Guarantee Program for Small Business Contractors

The primary benefit of the SBA Surety Bond Guarantee Program for small construction firms is that you get help in obtaining the bonds – from bid to performance and payment bonds – you need to land projects. Other benefits include:

  • Business growth: The program makes bonding more accessible to small businesses, but applicants must still meet the surety’s underwriting standards regarding credit, capacity, and character.
  • Competitive advantage: You’re able to compete in markets you would typically not be able to without the proper bonds in place.
  • Job creation with new hires: Federal contracts are generally in demand, so, as you’re able to penetrate this market, you will need additional workers to fulfill project duties.

Accessing Official SBA SBG Program Resources and Forms

Resources

Forms

You will need to complete the following forms for the SBG Program:

How CCIS Bonds Supports Contractors with SBA Surety Bonds

If your credit has been negatively impacted by tax liens, judgments, or bankruptcies or if you’re a newer contractor without a long track record, CCIS can help guide you through obtaining an SBA-backed bond. We are an approved SBA-approved surety agent.

Frequently Asked Questions About the SBA Surety Bond Guarantee Program

Can CCIS help me determine if my business is eligible for the SBA Surety Bond Guarantee Program?

Yes, CCIS is an approved SBA surety agent.

How long does it usually take to get approved for an SBA-guaranteed surety bond through CCIS?

Depending on the program, a bond can be issued within 24 hours and up to two days.

Are there fees involved in using the SBA Surety Bond Guarantee Program?

Small businesses using the program pay an SBA guarantee fee of 0.6% of the contract price for performance and payment bonds in addition to the standard bond premium charged by the surety company.

Note: Please note that bonds are subject to their terms and applicable statutory requirements. Coverage and benefits are only provided as outlined in the bond and under applicable federal or state laws.