Small businesses can now apply for surety bonds, which are required to bid for and perform some contracts through a new online system.
The revolutionized “E-app” through the U.S. Small Business Administration Web site will make the process easier, quicker and more accessible, according to SBA officials.
Previously, the applications were all submitted on paper.
Small and emerging construction, service and supply companies sometimes need surety bonds to bid, perform and pay for labor and equipment on a contract, either public or private.
The bonds, which constitute agreements among the surety company, the contractor and the project owner, ensure that if there is a contract default, then the project owner will be guaranteed a percent of the losses.
Participating surety companies, not the SBA, actually issue the bonds, but the SBA works with surety companies to guarantee the bonds, on contracts of up to $2 million.
The new online system, part of the SBA’s Surety Bond Guarantee Program, is expected to increase bond guarantees by 5 percent to 7 percent for fiscal 2008 over fiscal year 2007, which just ended Sunday.
In fiscal 2007, the SBA helped guarantee more than 5,700 bonds, according to SBA spokesman Dennis Byrne.
“The E- application system was developed in response to industry comments that the application process was too slow and cumbersome,” Byrne wrote in a statement to The Examiner.
According to Byrne, the new system will cut cycle time and reduce paperwork. Businesses and surety companies complete a prior approval program, and then they can submit the applications electronically.
Additionally, recent changes in rules have also streamlined the application process.
“These changes will support small businesses nationwide, particularly construction contractors in the devastated Gulf Coast region and other disaster stricken areas around the U.S.,” SBA Administrator Steve Preston said in a statement.
To promote the program, the SBA has reached out and will continue outreach efforts to surety companies, agents and brokers, industry associations, and small and emerging businesses.
