Congress recently voted to extend a landmark economic recovery bill aimed at boosting small business funding nationwide.
Small business owners snatched up more than $375 million in stimulus funding in 2009 through the SBA Recovery Act. With the program almost out of money, legislators agreed to extend funding through February. Nearly 1,000 small business owners were on a national waiting list for close to $500 million in SBA loans.
This same economic recovery legislation also included some significant financial benefits for small contractors in need of surety bonds.
The SBA has temporarily raised its guarantee on bonds for small contractors, who often struggle to purchase adequate bonding through traditional channels. Through September, the SBA can guarantee contracts worth up to $5 million for qualified small businesses — and even up to $10 million on certain public projects that meet the government’s needs. The agency usually guarantees bonds on contracts valued up to $2 million.
The increase can help level the playing field for small contractors. It can be tough for small businesses to land bigger construction deals. The SBA bond guarantee covers anywhere from 70 to 90 percent of the contract.
“Raising the surety bond limit is a critical step in making sure small businesses in the construction and service sector have access to federal contracting opportunities that will help drive economic recovery,” SBA Administrator Karen Mills said in a news release. “These changes support small and emerging businesses nationwide, particularly construction contractors who have seen their markets hurt by a poor economy and lagging construction.”
The SBA’s Surety Bond Guarantee Program covers four types of contract bonds: Bid Bonds, Payment Bonds, Performance Bonds and Ancillary Bonds.
As with any other surety bond, small contractors will be required to submit financial information for the underwriting process. Costs will change depending on the applicant, the surety company and the scope of the project.
Along with the bond premium, small contractors must pay the SBA’s fee, which is $7.29 per $1,000 of the contract amount.