Any surety company certified by the U.S. Department of the Treasury to issue bonds may apply for participation in the SBA Surety Bond Guarantee Program, which consists of the Preferred Program or the Prior Approval Program.

Preferred Program

The Preferred Surety Bond (PSB) Program was created to encourage larger surety companies to expand their efforts to help small businesses. SBA gives selected sureties the authority to issue, monitor and service bonds without prior SBA approval. Each participating company has a guarantee limit with the SBA. PSB surety companies serve more experienced contractors that demonstrate the potential for growth and consistently have more active work programs. Sureties participating in this program cannot participate in the Prior Approval program.

Eligibility

A surety company interested in participating in SBA’s PSB Program must meet the following guidelines:

• Surety must be a corporation approved by the U.S. Treasury to issue bonds in connection with Federal contracts.

• Surety must have an underwriting limitation of at least $2,000,000 on the U.S. Treasury Department list of acceptable sureties.

• Surety cannot charge a bond premium in excess of that authorized by the appropriate state insurance department, or impose any non-premium fee unless such a fee is permitted by applicable state law and approved by SBA.

• Premium income from contract bonds guaranteed by SBA can equal no more than one-quarter of the total contract bond premium income of the surety.

• The vesting of underwriting authority for an SBA guaranteed bond will be limited to permanent employees of the surety.

• The vesting of final settlement authority for claims and recovery will lie only in employees of the surety’s permanent claims department.

Application Requirements

Applications for SBA’s PSB Program must include the following information:

• Identification of the corporate entity that is applying, the names and titles of key executives, and points of contact responsible for management and administration of its programs.

• A summary statement describing any ongoing or planned mergers, acquisitions or other changes in organizational structure or key management positions that may influence participation and performance in the program.

• A mission/vision statement addressing the reasons for requesting authorization to participate in the PBS Program, and organizational goals and objectives relative to program.

• Applicant performance for each for the past three years:

• Number of bonds issued and total dollar value.

• Number of contract defaults and the total dollar value.

• Total dollar value of recoveries for each year.

• Loss rate for each year.

• Projected annual SBA bond guarantee activity, to include estimates of the number of bonds and total dollar value, over each of the first three years of program participation.

• Narrative summary of the standards, processes, and procedures for underwriting. (Most applicants submit a copy of their underwriting manual.)

• Narrative summary of the standards, processes and procedures for claims and recovery. (Most applicants submit a copy of manual(s).)

Prior Approval Program

Any surety company certified by the U.S. Treasury to issue bonds may apply for participation in the Prior Approval Program, but its bonds are subject to SBA's prior review and approval. SBA guarantees 90 percent of the losses incurred on bonds up to $100,000 and on bonds to socially and economically disadvantaged contractors, and 80 percent of the losses incurred on all other bonds under this program.

Eligibility

A surety company interested in participating in SBA’s Prior Approval Program must meet the following guidelines:

• Surety must be a corporation approved by the U.S. Treasury to issue bonds in connection with Federal contracts.

• Surety cannot charge a bond premium in excess of that authorized by the applicable state insurance department, or impose any non-premium fee unless such a fee is permitted by applicable state law and approved by SBA.

• Surety must comply with all regulatory requirements specified in Code of Federal Regulations Part 115, Subparts A&B.

• Surety must agree to use standards generally accepted by the surety industry in underwriting bond applications. These standards and must be used on both SBA and non-SBA guaranteed bonds.

• Surety must not sell or transfer its files or accounts unless it has obtained SBA’s prior written approval; does not apply to the sale of an entire business division, subsidiary, or operation of the surety. 

Questions should be directed to Mr. Frank Laluimere at (202) 205-6540 or by email: frank.lalumiere@sba.gov.

Applications should be sent to:

U. S. Small Business Administration
Office of Surety Guarantees
409 Third Street, SW, Suite 8600
Washington, DC 20416