in Surety Bond Guarantees Could Help Spur Construction Growth
March 30, 2009
In years past, many contract glaziers found it challenging to gain
surety bonding. In the early 2000s sureties incurred numerous losses
and tightened up on underwriting and pricing, closing off opportunities
for some small contract glaziers.
Then, just a couple of years ago, the industry loosened up and
bonding requirements became less stringent, making it a bit easier
for small contract glaziers to gain bonding. Now, even with the
country in the midst of an economic and financial crisis, for some
contract glaziers they are still successfully able to bond their
jobs. According to Danny Davis, vice president and chief operating
officer of Arrow Glass and Mirror in Austin, Texas, they have not
had any trouble bonding jobs. He says what they have seen in the
past year is that almost every significant job ($300,000 and up)
has to be bonded.
"Some commercial general contractors have made it their policy
that [contract glaziers] must have the capacity to obtain bonding,"
says Davis. "We think that is good and look at it as a competitive
But for those small business contract glaziers that may have struggled
in the past to gain bonding, help may be on the way. As part of
the Recovery Act, those companies can now qualify for U.S. Small
Business Administration (SBA)-backed surety bonds of up to $5 million,
more than double the previous amount of $2 million. Through its
Surety Bond Guarantee program, the SBA, in partnership with the
surety industry, will guarantee bid, payment and performance bonds.
The SBA will provide a guarantee to a participating surety company
of between 70 and 90 percent of the bond amount.
"Small businesses are the backbone of our nation's economy
and we want to get them up and growing again, as that will help
everyone," Frank Lalumiere, director of the SBA's Office of
Surety Guarantees, told USGNN.com. "The country is in a tough
way right now and a lot is being done to turn that around and construction
will play a role in that."
Lalumiere says that while construction may be slow, with the Recovery
Act money that is going toward it he expects to see it turn around.
"When that happens this program can help [contract glaziers]
on those future jobs," he says.
And for those companies that will be looking to take advantage
of the SBA's surety program, Lalumiere has a few tips they should
keep in mind.
"They need to be sure that they have a current business plan
in place, that they have their financial statements in order and
they need to be prepared to talk about cash flow requirements,"
HERE for more information about SBAs Surety Bonding Program.
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