US SMALL BUSINESS ADMINISTRATION SURETY BOND GUARANTY ASSISTANCE PROGRAM Mark S. Romanak  CIC The Brower Insurance Agency ...
SBA PROGRAMS <ul><li>1. Loan Program </li></ul><ul><li>2. Bond Program </li></ul><ul><li>3. 8A Program </li></ul><ul><li>4...
SBA BOND PROGRAM <ul><li>1. Provides Guaranty to Bonding Company </li></ul><ul><li>2. Plan A and Plan B Programs </li></ul...
PROVIDES GUARANTY TO BONDING COMPANY <ul><li>1. Guaranty varies depending on contract size and program </li></ul><ul><li>2...
Plan A  PROGRAM <ul><li>1. Surety or authorized agent underwrites contractor </li></ul><ul><li>2. Approves bond subject to...
PLAN B PROGRAM <ul><li>1. Preferred Surety Program </li></ul><ul><li>2. Surety company underwrites and defines what underw...
UNDERWRITING <ul><li>1. Plan A and Plan B different approaches </li></ul><ul><li>2. Experience – Will consider up to 2 tim...
PROGRAM QUALIFICATIONS <ul><li>1. Largest contract and bond written in SBA program is $2,000,000 </li></ul><ul><li>2. For ...
PROGRAM QUALIFICATIONS cont <ul><li>4. No federal or state tax liens against owner or company.  </li></ul><ul><li>5. No un...
PROGRAM QUALIFICATIONS cont <ul><li>7. No bonds written that exceed 100% of contract price </li></ul><ul><li>8. No complet...
INFORMATION NEEDED TO QUALIFY <ul><li>1. Last three fiscal year end financial statements </li></ul><ul><li>2. Latest inter...
INFORMATION NEEDED cont <ul><li>6. Current work on hand statement </li></ul><ul><li>7. Current bank line of credit </li></...
FINANCIAL STATEMENT <ul><li>1. Up to $100,000 will accept signed in house prepared statement </li></ul><ul><li>2. $100,000...
FINANCIAL STATEMENTS  cont <ul><li>1. Cover letter from accountant showing scope of examination </li></ul><ul><li>2. Balan...
FINANCIAL STATEMENTS cont <ul><li>1. Must be completed on an accrual basis.  </li></ul><ul><li>2. Must be a GAP basis rath...
SBA Forms <ul><li>1. SBA Form 912 – Statement of Personal History </li></ul><ul><li>2. SBA Form 994 – Application for Sure...
SBA Forms <ul><li>4. SBA Form 1624 – Debarment form </li></ul><ul><li>5. Forms can be obtained at SBA website  www.sba.gov...
TIME FRAME <ul><li>1. Initial submission 10 working days or less </li></ul><ul><li>2. Subsequent bid, performance and paym...
PREMIUM COSTS <ul><li>1. Some companies and brokers may charge bid bond fees. </li></ul><ul><li>2. SBA fee is $6.00 per th...
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Surety bondguarantyprogram

  1. 1. US SMALL BUSINESS ADMINISTRATION SURETY BOND GUARANTY ASSISTANCE PROGRAM Mark S. Romanak CIC The Brower Insurance Agency LLC April 20, 2004
  2. 2. SBA PROGRAMS <ul><li>1. Loan Program </li></ul><ul><li>2. Bond Program </li></ul><ul><li>3. 8A Program </li></ul><ul><li>4. Hub Zone Program </li></ul>
  3. 3. SBA BOND PROGRAM <ul><li>1. Provides Guaranty to Bonding Company </li></ul><ul><li>2. Plan A and Plan B Programs </li></ul><ul><li>3. Underwriting </li></ul><ul><li>4. Program Qualifications </li></ul><ul><li>4. Information needed to qualify </li></ul>
  4. 4. PROVIDES GUARANTY TO BONDING COMPANY <ul><li>1. Guaranty varies depending on contract size and program </li></ul><ul><li>2. Guaranty allows surety to relax some of their underwriting requirements </li></ul><ul><li>3. In event of bond claim, the bonding company adjusts the claim and then bills SBA for percentage of claim guaranty. </li></ul>
  5. 5. Plan A PROGRAM <ul><li>1. Surety or authorized agent underwrites contractor </li></ul><ul><li>2. Approves bond subject to SBA approval </li></ul><ul><li>3. Sends necessary information and SBA forms to appropriate SBA office for consideration </li></ul><ul><li>4. Upon approval, agent or surety executes bond. </li></ul><ul><li>5. Agent forwards necessary paperwork to surety </li></ul>
  6. 6. PLAN B PROGRAM <ul><li>1. Preferred Surety Program </li></ul><ul><li>2. Surety company underwrites and defines what underwriting will be </li></ul><ul><li>3. Obtains appropriate SBA forms </li></ul><ul><li>4. Guaranty automatic </li></ul><ul><li>5. Surety or authorized representative executes bond </li></ul>
  7. 7. UNDERWRITING <ul><li>1. Plan A and Plan B different approaches </li></ul><ul><li>2. Experience – Will consider up to 2 times the largest similar project completed </li></ul><ul><li>3. Financial – Working capital (actual plus unused bank line = 10% of job to bid plus costs to complete remaining work) </li></ul><ul><li>4. Bank Credit very important </li></ul><ul><li>5. Bonding Lines available </li></ul>
  8. 8. PROGRAM QUALIFICATIONS <ul><li>1. Largest contract and bond written in SBA program is $2,000,000 </li></ul><ul><li>2. For construction contractors, the per year sales average over last three fiscal years must be less than $5,000,000 </li></ul><ul><li>3. Sales average includes all businesses owned by business or owners of business. </li></ul>
  9. 9. PROGRAM QUALIFICATIONS cont <ul><li>4. No federal or state tax liens against owner or company. </li></ul><ul><li>5. No unsettled, uninsured lawsuits filed against company. </li></ul><ul><li>6. No unsatisfied judgments against company. </li></ul><ul><li>7. All SBA loan payments (if any) must be current </li></ul>
  10. 10. PROGRAM QUALIFICATIONS cont <ul><li>7. No bonds written that exceed 100% of contract price </li></ul><ul><li>8. No completion bonds (subdivision type) </li></ul><ul><li>9. Contract bid, performance, payment and maintenance bonds only. </li></ul><ul><li>10. No existing or unsettled bond claims with SBA </li></ul>
  11. 11. INFORMATION NEEDED TO QUALIFY <ul><li>1. Last three fiscal year end financial statements </li></ul><ul><li>2. Latest interim financial statement if other is over 6 months old </li></ul><ul><li>3. Current personal financial statement of all owners who have more than 20% ownership </li></ul><ul><li>4. Current contractor questionnaire </li></ul><ul><li>5. Current aging of accounts receivable and payable </li></ul>
  12. 12. INFORMATION NEEDED cont <ul><li>6. Current work on hand statement </li></ul><ul><li>7. Current bank line of credit </li></ul><ul><li>8. Current certificate of insurance </li></ul><ul><li>9. SBA forms completed and signed </li></ul><ul><li>10. Signed, witnessed and notarized general indemnity agreement </li></ul>
  13. 13. FINANCIAL STATEMENT <ul><li>1. Up to $100,000 will accept signed in house prepared statement </li></ul><ul><li>2. $100,000 - $250,000 CPA Compilation </li></ul><ul><li>3. Over $250,000 CPA “Reviewed” financial statement </li></ul>
  14. 14. FINANCIAL STATEMENTS cont <ul><li>1. Cover letter from accountant showing scope of examination </li></ul><ul><li>2. Balance Sheet </li></ul><ul><li>3. Profit and Loss statement </li></ul><ul><li>4. Statement of Cash Flows </li></ul><ul><li>5. Notes to Financial statement </li></ul>
  15. 15. FINANCIAL STATEMENTS cont <ul><li>1. Must be completed on an accrual basis. </li></ul><ul><li>2. Must be a GAP basis rather than Income Tax basis </li></ul>
  16. 16. SBA Forms <ul><li>1. SBA Form 912 – Statement of Personal History </li></ul><ul><li>2. SBA Form 994 – Application for Surety Bond Guaranty Assistance </li></ul><ul><li>3. SBA Form 1261 – Statements Required by Laws and Executive Orders </li></ul>
  17. 17. SBA Forms <ul><li>4. SBA Form 1624 – Debarment form </li></ul><ul><li>5. Forms can be obtained at SBA website www.sba.gov . Click on “Online Library” then click on forms. </li></ul>
  18. 18. TIME FRAME <ul><li>1. Initial submission 10 working days or less </li></ul><ul><li>2. Subsequent bid, performance and payment bonds 3 working days or less. </li></ul>
  19. 19. PREMIUM COSTS <ul><li>1. Some companies and brokers may charge bid bond fees. </li></ul><ul><li>2. SBA fee is $6.00 per thousand of contract price </li></ul><ul><li>3. Premium rate varies by surety company. </li></ul>

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