Many small contractors hit a wall when they try to qualify for surety bonds. Their credit is thin, their financial history is short, or their project is larger than a standard surety program can support. The SBA Surety Bond Guarantee Program exists for exactly this situation.
The program does not issue bonds directly. Instead, the Small Business Administration guarantees a portion of the surety’s potential loss if the contractor defaults. That guarantee gives participating sureties the confidence to bond contractors they would otherwise decline to bond. In FY2024, the SBA-backed bonds covered $9.21 billion in contract value for more than 11,000 small businesses.
What the Program Covers
The SBA guarantees bid, performance, payment, and ancillary bonds for non-federal contracts up to $9 million and for federal contracts up to $14 million, provided a contracting officer certifies that the guarantee is necessary. The SBA covers 90% of surety losses on contracts up to $100,000 and on bonds issued to socially and economically disadvantaged businesses, HUBZone businesses, 8(a) participants, and veteran-owned firms. It covers 80% of losses on all other qualifying contracts.
Two Program Tracks
Prior Approval Track
The Prior Approval track requires the surety to submit the contractor’s application to the SBA before issuing a bond. The SBA reviews the file and issues the guarantee. This track works well for contractors with limited financials but a strong project opportunity.
Preferred Surety Bond Track
The Preferred Surety Bond track lets selected sureties issue bonds under the SBA guarantee without waiting for SBA prior approval. This speeds things up considerably. For well-prepared applications, preferred track bonds can be issued in timeframes close to standard commercial bonds.
Who Benefits Most
First-time bond applicants, contractors with below-average credit but solid project experience, minority- and women-owned businesses, veterans entering construction contracting, and companies growing faster than their financials can support are all strong candidates for the SBA program.
How to Apply
You do not apply to the SBA directly. You apply through an SBA-authorized surety agent, such as Ai Surety Bonding USA. We work with carrier partners participating in both the Prior Approval and Preferred tracks. We guide you through SBA Form 994, help organize your financials and project details, and submit the package to the right track for your situation.
There is a small SBA guarantee fee of 0.6% of the contract price for performance and payment bonds. Bid bond guarantees carry no SBA fee.
Apply for SBA Surety Bonding
► Apply for SBA Surety Bonding
► Talk to a Surety Specialist
► Call 281-845-1468