By Joseph P. Leverich, CPA

When you go out in search of bonding, the federal government probably doesn't immediately leap to mind. But the Small Business Administration (SBA) is an option and, thanks to recent legislation, they have some pretty good offerings.

Boosting the bond

What makes SBA surety services particularly attractive right now is the fact that the agency's bonding amounts recently got a big boost.

Specifically, a provision in the American Recovery and Reinvestment Act of 2009 — also known as the stimulus act — increased the maximum amount of bonding the SBA can offer under its Surety Bond Guarantee Program from $2,000 to $5,000. The SBA will guarantee bid, payment and performance bonds to qualifying companies at these amounts through September 2010 on all public and private contracts and subcontracts. It does so by partnering with members of the surety industry and covering 70% to 90% of the bond amount.

What's more, in July 2009, the SBA agreed to raise the maximum amount it will guarantee for federal contracts to $10 million. The bonding uptick on government projects fits together nicely with the expected rise in the number of such jobs, thanks to the stimulus act. "These changes support small and emerging businesses nationwide," said SBA Administrator Karen Mills. "Particularly construction contractors who have seen their markets hurt by a poor economy and lagging construction."

Learning more

If you haven't checked into the SBA's Surety Bond Guarantee Program lately (or at all), now's a good time to do so. The agency recently established a new electronic bond application process that greatly speeds up applicants' ability to obtain bonding. All application forms are available online and can be transmitted, expedited and approved electronically.

The SBA also offers a Preferred Surety Bond Program that allows selected bonding firms to issue SBA-backed loans without the agency's prior approval. This is something to consider when shopping around for bonding providers.

Knowing your options

If you already have a good, established relationship with a surety, you probably shouldn't abandon it just to give the SBA a try. A strong, time-tested surety arrangement can be a huge benefit to a construction company. But SBA-backed bonding is an intriguing alternative that has recently gotten much more attractive. To learn more about what the agency offers, check out its Web site at sba.gov.