Small Contractors Could Benefit from SBA Proposed Surety Regulatory Changes

The Small Business Administration (SBA) has proposed a number of regulatory changes that are designed to make improvements to its Surety Bond Guarantee (SBG) Program and to encourage more participation by small businesses, including small glazing contractors, and surety companies.

"The public comment period for the proposed rule closed on October 26. SBA is currently reviewing the comments received and looks forward to publishing the final rule early next year," said Frank Lalumiere, associate administrator of the Office of Surety Guarantees, U.S. Small Business Administration.

There are six proposed changes:

  • SBA will increase its guarantee percentage to 90 percent to Prior Approval sureties for bonds written on behalf of veteran-owned and service-disabled veteran-owned firms. Currently, SBA guarantees 80 percent of a surety's loss unless the contract is $100,000 or less, or the bond is issued on behalf of a disadvantaged or HubZone firm.
  • Preferred Surety Bond (PSB) sureties will be able to charge premium rates that are permitted under applicable state laws. The current regulation limits the charge to the Surety Association of America's published 1987 premium advisory rates.
  • The requirement to perform annual audits of all PSB sureties will be changed to require audits of PSB sureties at least once every three years.
  • Affiliates of PSB sureties will be able to participate in the Prior Approval Program.
  • The proposed rule will clarify that the PSB Program has been made permanent.
  • SBA will require that the surety submit its surety fee to SBA within 45 calendar days of SBA's approval of the guarantee agreement. Currently, there is no definitive deadline; sureties are required to pay the fee "within the ordinary course of business."

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