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Understanding the SBA Surety Bond Guarantee Program

by Surety Admin 13. June 2011 13:51
In 1935, Congress passed the Federal Miller Act requiring a payment and performance bond for all federal contracts over $100,000. As a result, many small or emerging contractors found it difficult to compete with larger construction companies and were not able to obtain the requisite surety support.
To alleviate this barrier, the Small Business Administration (SBA) began the Surety Bond Guarantee (SBG) Program in 1968. The SBG program was designed to assist contractors who did not qualify for surety bonds in the standard market. Contractors must meet specific size standards related to industry standards and the size of the contract must not exceed $2,000,000. In addition to size standards, the SBA charges a fee of $7.29 per $1,000 of the total contract amount for payment and performance bonds. This fee is in addition to the premium charged by the Surety.
The SBA will guarantee a portion of the bond (70-90%) and will reimburse the surety company if the contractor defaults. This reduces the risk for sureties and makes it possible for small-to-midsized contractors to obtain bonding.
In order to be considered for the SBA SBG program, contractors must submit their underwriting information to an approved agent. The agent will then submit the account to the SBA for admission into the program. The Surety Group has participated in this program for over 30 years. 
SBA Surety Bond Guarantee Program—Plan A- Prior Approval Program
Plan A of the SBA SBG program requires the surety agent to obtain the SBA’s approval on all bonds before issuing. The SBA provides an 80 – 90% guarantee on bonds approved through this plan.
A 90% guarantee is provided for contracts under $100,000 and for socially and economically disadvantaged contractors: HUB Zone contractors, Veteran contractors, and service disabled contractors. All others receive an 80% guarantee. 

SBA Surety Bond Guarantee Program—Plan B- Preferred Surety
Plan B of the SBA SBG program allows the surety to approve the bonds without obtaining prior approval from the SBA. The surety supporting the bond must be listed on the US Treasury (Circular 570) or T-List of acceptable sureties and accepted by the SBA to participate. The surety must follow certain rules and regulations set forth by the SBA in order to be qualified in the Plan B program. Plan B provides a 70% guarantee for all bonds. 

Getting Started

The Surety Group has been working with the SBA for over 30 years and understands the ins and outs of the program. With SBA support, contractors with the skills and expertise to complete the job but not necessarily the working capital or net worth for traditional bond programs, can now qualify for bid, payment and performance bonds. The Surety Group works with sureties in both Plan A (prior approval) and Plan B (preferred surety) programs. 
Getting started is easy. Simply complete the Contractor’s Bond Kit and submit it to The Surety Group. Your bond request must be submitted to the SBA through The Surety Group. We will assist you in completing all SBA forms and then handle the rest.
Contact The Surety Group today for more information, 800-486-8211, or visit the Contract Bonds page. 

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Surety Blog Categories:  Contract Bonds | Surety Law Changes | Industry News

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