SBA can help small contractors compete for jobs

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In the coming year, the Springfield Business Journal has afforded me the privilege to provide small business readers with monthly information on federal programs that may help them in their endeavors. |ret||ret||tab|

In today's economy, these programs become even more important to help companies stay productive and add to our economy.|ret||ret||tab|

As we observe the 30th anniversary of the Small Business Administration's Surety Bond Program, it seems appropriate to bring to the attention of contractors and surety bond companies the opportunity this program provides. |ret||ret||tab|

The program was launched in 1971 to assist small, emerging and disadvantaged contractors by strengthening small contractors' ability to compete within the free enterprise system. It offers guarantees for the four types of surety bonds required by project owners: bid, payment, performance and ancillary bonds.|ret||ret||tab|

Surety bonds are sometimes difficult for bonding companies to issue in a slow economy. Contracts tend to be more competitive with a lower profit margin. A growing company's assets often are pledged to other projects. Sometimes a company is not mature enough to show a solid track record of performance. These added risks reduce a surety's willingness to bond.|ret||ret||tab|

This is when the contractor may ask the bond company to call upon the SBA. The Small Business Administration of-fers guarantees as an incentive to agents to issue bonds to the project owner. |ret||ret||tab|

To qualify, both the contractor and the project must be "small" as determined by the SBA, with average annual receipts not exceeding $5 million for the prior three years and the contract not exceeding $1.25 million. Manufacturing firms must employ 500 or fewer. Statistically, this is about 97 percent of Springfield area businesses.|ret||ret||tab|

For the SBA to evaluate its risk, the contractor must provide the bonding agent with credit, capacity and character information. The SBA requires an organizational chart with rsums of key people, a business plan, current financial statements prepared by an accountant or CPA, two previous years of financial statements, a record of previous contract performance and the status of any current work. |ret||ret||tab|

If approved, the SBA agrees to assume a predetermined (70 percent to 90 percent) portion of loss in the event the contractor breaches the terms of the contract. |ret||ret||tab|

For some companies, the program becomes a launch pad for successful growth. An example is KC Excavating, which used the program in 1999 to solidify its contract performance record and build its company's reputation. |ret||ret||tab|

Co-owners Kent Burgess and J. V. Van Allen said their first bonding experience was for a city water line project. It was a small contract, and the company's crew was inexperienced. Bonding companies would not take the risk. |ret||ret||tab|

"With SBA's guarantee and our performance since that first bonded job, we've been able to build our company and can now successfully compete on projects in the $500,000 range," Van Allen said. The company's gross revenues now exceed seven figures.|ret||ret||tab|

After 30 years, the SBA Surety Bond program continues to serve small and emerging businesses. During fiscal 2001, SBA guaranteed 4,580 bid, 1,740 final bonds with contract values totaling $341,922,540. More than $65 million already is SBA-secured this year. With SBA, the businesses in the Springfield area have two more ways to win a chance to show their mettle and their fair share of contract jobs. |ret||ret||tab|

For more information about all of the SBA's programs for small businesses, contact the local SBA office|ret||ret||tab|

(Sam Jones is regional administrator for Region VII of the U.S. Small Business Administration.)[[In-content Ad]]