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New law increases SBA bond guarantee by 20 percent

President Barack Obama signed the National Defense Authorization Act of Fiscal Year 2016 on November 25, 2015, which among other changes, increases the maximum guarantee percentage in the Small Business Administration's (SBA) Preferred Surety Bond (PSB) Program from 70 percent to 90 percent.

"This is the first significant legislative change to the surety bond guarantee program in several decades. It will provide increased incentives for surety bond companies and bond producers to participate in the program, which will expand contracting opportunities for small businesses across the country," said Frank Lalumiere, Surety Bond Guarantee Program Director at SBA.

Through the program, the SBA guarantees between 70 and 90% of the losses and expenses incurred by the surety company if the small business fails to complete the contract. This encourages the surety company to issue a bond that it would otherwise not issue to a small business. In turn, with the backing of a surety bond, a small business contractor may bid on a project that otherwise it could not bid on.

For more information about the SBA Surety Bond Guarantee Program, visit https://www.sba.gov/surety-bonds.