SURETY BONDS

          The City of Sacramento does not have a surety bond program in place, but provides the following as an informational tool for the small business owner interested in learning more on the subject.

The Small Business Administration (SBA)
Surety Bond Guarantee (SBG) Program ¹

          The Small Business Administration (SBA) has a Surety Bond Guarantee (SBG) Program which was developed to provide small and minority contractors with contracting opportunities for which they would not otherwise bid.  The Office of Surety Guarantees administers the SBG program through a private-public partnership between the federal government and the surety industry.  SBA guarantees bid, performance, payment and ancillary bonds issued by surety companies for construction, service and supply contracts and reimburses the sureties a percentage of the losses sustained if the contractor defaults.  SBA's guarantee provides the incentive necessary for sureties to issue bonds to contractors who could not otherwise compete in the contracting industry.

          The SBG Program consists of the Prior Approval program and the Preferred Surety Bond (PSB) Program.  The Prior Approval program guarantees up to 90 percent of a surety's loss.  Participants must obtain SBA's approval for each bond guarantee issued.  Under the PSB program, sureties receive a 70 percent guarantee and are empowered to issue service and monitor bonds without SBA's prior approval.  Each of these programs targets a different segment of the contracting community and both are necessary to reach all small business clientele.

          The surety bond guarantee programs are a major factor in the surety reinsurance and contracting industries and are recognized as a primary stabilizing influence by those industries.

     For more information on the Surety Bond Program, visit the US SBA web site at www.sba.gov or contact the SBA's Sacramento District Office at:

U. S. Small Business Administration
Sacramento District Office
650 Capitol Mall
Suite 7-500
Sacramento, CA 95814
(916) 930-3700
(916) 930-3737 Fax

¹ From "Small Business Resource Guide," 2003 Edition, published by the US SBA, Sacramento District Office and RENI Publishing.