The SBA Bond Guarantee Program can be a great tool for a small contractor to obtain bonds who otherwise would not be able to qualify. like most programs there are advantages and disadvantages to the program. The main advantage is the ability to qualify for bonds that one otherwise would not. Disadvantages include:

  • Qualification can be slow
  • There is much paperwork required
  • There is a surcharge added to the bond premium
  • The bond limit is capped at $2 Million

Contractors qualify for the program if they are able to meet the following criteria:

  • The business must be classified as small
  • Your business must be unable to obtain a bond without an SBA guarantee. This means that the SBA is your only option to obtain a bond.
  • The size of the project cannot exceed $2 Million
  • A bond is required in the contract
  • The surety must have a reasonable expectation that the contractor can successfully complete the contract. This analysis is the underwriting process.

We recommend completing a standard surety application before moving on the SBA application. This way an analysis can be made to see if all of the SBA requirements can be met prior to the completion of the large SBA application.

The SBA and GSA has a program for Disadvantaged Business called the 8A program. The 8A contractor is not required to participate in the bond guarantee. This is an excellent program for emerging contractors. Ask your professional bond agent for more details about the 8A program.