Surety Bonds are three-party instruments between a surety, the contractor and the project owner. The agreement binds the contractor to comply with the terms and conditions of a contract. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed.
Surety Bonds Qualifications
A contractor applying for an SBA bond guarantee must qualify as a small business, in addition to meeting the surety's bonding qualifications. Businesses in the construction and service industries can meet SBA's size eligibility standards if their average annual receipts, including those of all affiliates, for the last three fiscal years do not exceed $6 million. Local SBA offices can answer questions dealing with size standard eligibility.
Contractors should apply for a specific bond with an agent or surety company of their own choice, providing background, credit and financial information required by the surety company and the SBA.