Helpful Tips and Surety Bond Philosophy

From the SBA Bond Wizard

There is a great deal to understand about the process of obtaining Performance and Payment Bonds.  Yes, it is important to be able to show that you will successfully complete a particular contract or contracts – but, with experience, you will learn some of the less obvious aspects of the bond business.  The SBA Bond Wizard would like to share some thoughts with you in this regard.  Read on!

         Maintain a positive attitude.  Bond companies want to give you a bond.  That’s how they make their living.  In recent years, bonding has been more accessible to small contractors than ever before.

         Keep trying.  Different bond companies may have slightly different qualifications for bonding. “If at first you don’t succeed ….” Don’t give up!

         Don’t believe anyone who tells you the SBA Bond Guarantee Program is a paperwork nightmare.  This just isn’t the case!  The SBG Program does not add a lot of “red tape” to the bonding process.  It is a very workable program that has been in place since the early 1970s, and has helped many thousands of small and emerging contractors. Recently, paperwork reduction initiatives have made the program even easier to use.  In general, the program requires the same paperwork that your bonding company would want anyway. (A few simple SBA forms are required to set the account up.)

        Always fill out bond applications honestly and completely.  Character is something surety bond underwriters value highly.  Never “fudge” the truth.  Should a bond underwriter discover that an applicant has been less than truthful, for whatever reason, that underwriter will very likely be unwilling to provide any bonds.  No one is perfect, and agents know that good contractors can occasionally stumble.

         Professionalism counts!  Very likely, bond underwriters will not have the opportunity to visit one of your job sites in person, or to make an office call.  You may even be dealing wholly through the US mails, without meeting in person at all.  Therefore, the impression given in the paperwork submitted is important.  A well-written business plan and resume can help small, new and emerging businesses receive maximum bond credit.  A business financial statement prepared by a Certified Public Accountant (CPA) is a plus.

         Remember that the cost of a bond (“bond premium”) is actually paid by the entity requiring the bond.  Surety bonds are not for your benefit.  They are for the benefit of those who you work for, or buy from.  The costs, however, are eventually passed on to the entity (federal, state, water district, etc.) that is requiring the bond, as a part of your contract price.