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Increases in Surety Bond Guarantees Could Help Spur Construction Growth

Post Time:Mar 31,2009Classify:Industry NewsView:344

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 advantage."

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, said. "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," says Lalumiere.

Source: Small Business AdministrationAuthor: shangyi

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