Small Businesses and the SBA’s Surety Bond Guarantee Program

For more than 30 years, the U.S. Small Business Administration (SBA) Surety Bond Guarantee Program has helped small businesses obtain surety bonds that they may have been unable to obtain through regular commercial channels. This program allows the SBA to work with surety companies to accept applicants who may not qualify for a surety bond due to lack of credit history, experience or financial strength.

The SBA Surety Bond Guarantee Program can guarantee contract bonds for small and emerging contractors who cannot obtain surety bonds through typical commercial avenues.

The various types of contract bonds covered include:

• Bid Bond: A guarantee that a contractor will enter into a contract if awarded the bid.


• Performance Bond: A guarantee that a contractor will perform the work as specified by the contract.


• Payment Bond: A guarantee that a contractor will pay subcontractors, labor and material bills associated with the contract.

The SBA does not issue the bond but rather provides a guarantee in the event of contractor default.

With the economic decline several years ago, one of the hardest hit industries was construction. Ironically, the SBA saw an increase not only in the surety bond guarantee volume but also in the number of participating surety companies. In February of 2009, Congress passed the American Recovery and Reinvestment Act which allowed the SBA to increase the maximum surety bond amount from $2 million to $5 million. According to Jeanne Hulit, Acting Associate Administrator for Capital Access in the SBA Office of Surety Bond Guarantees, “The Recovery Act infused new life into the surety bond program as seen by the increase in program activity in fiscal year 2010. The total number of bonds guaranteed in that year represented a 36% increase over the previous fiscal year. In fiscal year 2010, SBA guaranteed a total of 8,348 bonds representing a contract value of $4 billion.”

The SBA continues to work diligently on reaching out to small businesses to create an awareness of their Surety Bond Guarantee Program. In an effort to make the program better and more easily accessible, the SBA developed an electronic bond guarantee application which allows surety companies and small businesses to upload a variety of documents which can then be electronically submitted to SBA field offices. Jeanne Hulit also said that the SBA “will be publishing a proposed rule that will adopt a streamlined application process for any bond guarantee on a contract valued up to $250,000. This new “Quick Application” process will reduce paperwork requirements for smaller contracts. As a result, small businesses and surety agents will navigate the bond application process more easily and the cycle time between application and approval will be compressed.”

The SBA plans to continue reviewing its current regulations in an effort to update, streamline and simplify the surety bond regulations