Transcript Document
US SMALL BUSINESS
ADMINISTRATION SURETY BOND
GUARANTY ASSISTANCE PROGRAM
Mark S. Romanak CIC
The Brower Insurance Agency LLC
April 20, 2004
SBA PROGRAMS
1. Loan Program
2. Bond Program
3. 8A Program
4. Hub Zone Program
SBA BOND PROGRAM
1. Provides Guaranty to Bonding Company
2. Plan A and Plan B Programs
3. Underwriting
4. Program Qualifications
4. Information needed to qualify
PROVIDES GUARANTY TO BONDING
COMPANY
1. Guaranty varies depending on contract size
and program
2. Guaranty allows surety to relax some of their
underwriting requirements
3. In event of bond claim, the bonding company
adjusts the claim and then bills SBA for
percentage of claim guaranty.
Plan A PROGRAM
1. Surety or authorized agent underwrites contractor
2. Approves bond subject to SBA approval
3. Sends necessary information and SBA forms to
appropriate SBA office for consideration
4. Upon approval, agent or surety executes bond.
5. Agent forwards necessary paperwork to surety
PLAN B PROGRAM
1. Preferred Surety Program
2. Surety company underwrites and defines what
underwriting will be
3. Obtains appropriate SBA forms
4. Guaranty automatic
5. Surety or authorized representative executes
bond
UNDERWRITING
1. Plan A and Plan B different approaches
2. Experience – Will consider up to 2 times the
largest similar project completed
3. Financial – Working capital (actual plus
unused bank line = 10% of job to bid plus costs
to complete remaining work)
4. Bank Credit very important
5. Bonding Lines available
PROGRAM QUALIFICATIONS
1. Largest contract and bond written in SBA
program is $2,000,000
2. For construction contractors, the per year
sales average over last three fiscal years must
be less than $5,000,000
3. Sales average includes all businesses owned
by business or owners of business.
PROGRAM QUALIFICATIONS cont
4. No federal or state tax liens against owner or
company.
5. No unsettled, uninsured lawsuits filed against
company.
6. No unsatisfied judgments against company.
7. All SBA loan payments (if any) must be current
PROGRAM QUALIFICATIONS cont
7. No bonds written that exceed 100% of
contract price
8. No completion bonds (subdivision type)
9. Contract bid, performance, payment and
maintenance bonds only.
10. No existing or unsettled bond claims with
SBA
INFORMATION NEEDED TO QUALIFY
1. Last three fiscal year end financial statements
2. Latest interim financial statement if other is
over 6 months old
3. Current personal financial statement of all
owners who have more than 20% ownership
4. Current contractor questionnaire
5. Current aging of accounts receivable and
payable
INFORMATION NEEDED cont
6. Current work on hand statement
7. Current bank line of credit
8. Current certificate of insurance
9. SBA forms completed and signed
10. Signed, witnessed and notarized general
indemnity agreement
FINANCIAL STATEMENT
1. Up to $100,000 will accept signed in house
prepared statement
2. $100,000 - $250,000 CPA Compilation
3. Over $250,000 CPA “Reviewed” financial
statement
FINANCIAL STATEMENTS cont
1. Cover letter from accountant showing scope
of examination
2. Balance Sheet
3. Profit and Loss statement
4. Statement of Cash Flows
5. Notes to Financial statement
FINANCIAL STATEMENTS cont
1. Must be completed on an accrual basis.
2. Must be a GAP basis rather than Income Tax
basis
SBA Forms
1. SBA Form 912 – Statement of Personal
History
2. SBA Form 994 – Application for Surety Bond
Guaranty Assistance
3. SBA Form 1261 – Statements Required by
Laws and Executive Orders
SBA Forms
4. SBA Form 1624 – Debarment form
5. Forms can be obtained at SBA website
www.sba.gov. Click on “Online Library” then
click on forms.
TIME FRAME
1. Initial submission 10 working days or less
2. Subsequent bid, performance and payment
bonds 3 working days or less.
PREMIUM COSTS
1. Some companies and brokers may charge bid
bond fees.
2. SBA fee is $6.00 per thousand of contract
price
3. Premium rate varies by surety company.