How the SBA Surety Bond Program Works

The SBA guarantees surety bonds

Surety bonds help small businesses win contracts by providing the customer with a guarantee that the work will be completed. Many public and private contracts require surety bonds, which are offered by surety companies. The SBA guarantees surety bonds for certain surety companies, which allows the companies to offer surety bonds to small businesses that might not meet the criteria for other sureties.

How the SBA Surety Bond Program works

Businessman and contract

Surety bonds are requested

Some contracts require that the business doing the work be properly bonded.

Business and contract

Surety partners with business

Authorized surety companies provide surety bonds to businesses that meet their qualifications.


The SBA guarantees

The SBA guarantees surety bonds for private surety companies, so more small businesses can qualify.


Small businesses benefit

Small businesses get SBA-guaranteed surety bonds so they can get to work.

Contract or commercial bonds

Depending on the the type of work, a business may be required to obtain a contract bond or a commercial bond.

The SBA guarantees contract bonds, but doesn’t guarantee commercial bonds. Contract bonds ensure the terms of a specific contract are fulfilled. Commercial bonds ensure all applicable laws and regulations are followed. Government agencies require certain companies or individuals to obtain commercial bonds, which protect the general public against things like fraud.

The right surety bond for the project

Some contracts require surety bonds that cover specific situations. The SBA guarantees surety bonds that cover several major categories of work.



Ensures full payment and performance bonding from the contract bidder.

Cash in hand


Ensures full payment to the suppliers and subcontractors.

Checklist and magnifying glass


Ensures full completion of a contract by small business.

Wrench and gear


Ensures completion of requirements outside of performance or payment, such as maintenance.

Bond Guarantee Fee

All performance and payment bond guarantees require small businesses to pay the SBA a fee of .6% of the contract price. If for some reason the bond is cancelled or not issued, the SBA will return the guarantee fee. The SBA does not charge a fee for bid bond guarantees.


Determine your small business’s level of eligibility before obtaining a surety bond. Does your business meet the following requirements?


Be a small business

Qualify as a small business according to the SBA’s size standards.


Have a small contract

Up to $6.5 million for non-federal contracts and up to $10 million for federal contracts.


Pass evaluation

Meet the surety company’s credit, capacity, and character requirements.

Source: U.S. Small Business Administration, “How the SBA Surety Bond Program works” website. Accessed July 12, 2022.

© Copyright 2022. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented.

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