The U.S. Small Business Administration on Sept. 4 announced its Surety Bond Guarantee program is reducing the surety fee from 26% to 20% of the bond premium charged to small businesses and reducing its contractor fee from $7.29 per thousand dollars of the contract amount to $6.00 per thousand dollars of the contract amount.
The fee decrease will be in effect for guaranteed bonds approved during fiscal year 2019, taking effect Oct. 1, 2018, and ending Sept. 30, 2019.
The move represents the first fee decrease in surety bond guarantees in 12 years, the SBA said in a statement.
“Reducing the SBG program fees will not only directly help small businesses, but also will incentivize surety companies and their agents to increase support for small businesses in the marketplace,” said Acting Director of the Office of Surety Guarantees Peter C. Gibbs, in a statement.
How the SBG Program Works
Surety bonds help small businesses win contracts by providing the customer with a guarantee that the work will be completed.
Under its SBG program, the SBA guarantees bid, payment, and performance bonds for small and emerging contractors who cannot obtain surety bonds through regular commercial channels. The SBA guarantees contracts up to $10 million, including the streamlined QuickApp application for those up to $400,000.
The SBA's guarantee gives sureties an incentive to provide bonding for small businesses and thereby assists small businesses in obtaining greater access to contracting opportunities. Currently, there are 34 participating sureties and over 350 active agents in the SBG program.
On average, completed surety bond applications are reviewed and processed in less than two days.