US SMALL BUSINESS ADMINISTRATION SURETY

BOND GUARANTY ASSISTANCE PROGRAM

US SMALL BUSINESS ADMINISTRATION SURETY

BOND GUARANTY ASSISTANCE PROGRAM

Mark S. Romanak CICThe Brower Insurance Agency LLC

April 20, 2004

SBA PROGRAMSSBA PROGRAMS

1. Loan Program 2. Bond Program 3. 8A Program 4. Hub Zone Program

SBA BOND PROGRAMSBA BOND PROGRAM

1. Provides Guaranty to Bonding Company 2. Plan A and Plan B Programs 3. Underwriting 4. Program Qualifications 4. Information needed to qualify

PROVIDES GUARANTY TO BONDING COMPANY

PROVIDES GUARANTY TO BONDING COMPANY

1. Guaranty varies depending on contract size and program

2. Guaranty allows surety to relax some of their underwriting requirements

3. In event of bond claim, the bonding company adjusts the claim and then bills SBA for percentage of claim guaranty.

Plan A PROGRAMPlan A PROGRAM 1. Surety or authorized agent underwrites contractor 2. Approves bond subject to SBA approval 3. Sends necessary information and SBA forms to

appropriate SBA office for consideration 4. Upon approval, agent or surety executes bond. 5. Agent forwards necessary paperwork to surety

PLAN B PROGRAMPLAN B PROGRAM

1. Preferred Surety Program 2. Surety company underwrites and defines what

underwriting will be 3. Obtains appropriate SBA forms 4. Guaranty automatic 5. Surety or authorized representative executes

bond

UNDERWRITINGUNDERWRITING 1. Plan A and Plan B different approaches 2. Experience – Will consider up to 2 times the

largest similar project completed 3. Financial – Working capital (actual plus

unused bank line = 10% of job to bid plus costs to complete remaining work)

4. Bank Credit very important 5. Bonding Lines available

PROGRAM QUALIFICATIONS

PROGRAM QUALIFICATIONS

1. Largest contract and bond written in SBA program is $2,000,000

2. For construction contractors, the per year sales average over last three fiscal years must be less than $5,000,000

3. Sales average includes all businesses owned by business or owners of business.

PROGRAM QUALIFICATIONS contPROGRAM QUALIFICATIONS cont

4. No federal or state tax liens against owner or company.

5. No unsettled, uninsured lawsuits filed against company.

6. No unsatisfied judgments against company. 7. All SBA loan payments (if any) must be

current

PROGRAM QUALIFICATIONS contPROGRAM QUALIFICATIONS cont

7. No bonds written that exceed 100% of contract price

8. No completion bonds (subdivision type) 9. Contract bid, performance, payment and

maintenance bonds only. 10. No existing or unsettled bond claims with

SBA

INFORMATION NEEDED TO QUALIFYINFORMATION NEEDED TO QUALIFY 1. Last three fiscal year end financial statements 2. Latest interim financial statement if other is

over 6 months old 3. Current personal financial statement of all

owners who have more than 20% ownership 4. Current contractor questionnaire 5. Current aging of accounts receivable and

payable

INFORMATION NEEDED cont

INFORMATION NEEDED cont

6. Current work on hand statement 7. Current bank line of credit 8. Current certificate of insurance 9. SBA forms completed and signed 10. Signed, witnessed and notarized general

indemnity agreement

FINANCIAL STATEMENTFINANCIAL STATEMENT

1. Up to $100,000 will accept signed in house prepared statement

2. $100,000 - $250,000 CPA Compilation 3. Over $250,000 CPA “Reviewed” financial

statement

FINANCIAL STATEMENTS contFINANCIAL STATEMENTS cont

1. Cover letter from accountant showing scope of examination

2. Balance Sheet 3. Profit and Loss statement 4. Statement of Cash Flows 5. Notes to Financial statement

FINANCIAL STATEMENTS cont

FINANCIAL STATEMENTS cont

1. Must be completed on an accrual basis. 2. Must be a GAP basis rather than Income Tax

basis

SBA FormsSBA Forms

1. SBA Form 912 – Statement of Personal History

2. SBA Form 994 – Application for Surety Bond Guaranty Assistance

3. SBA Form 1261 – Statements Required by Laws and Executive Orders

SBA FormsSBA Forms

4. SBA Form 1624 – Debarment form 5. Forms can be obtained at SBA website

www.sba.gov. Click on “Online Library” then click on forms.

TIME FRAMETIME FRAME

1. Initial submission 10 working days or less

2. Subsequent bid, performance and payment bonds 3 working days or less.

PREMIUM COSTSPREMIUM COSTS

1. Some companies and brokers may charge bid bond fees.

2. SBA fee is $6.00 per thousand of contract price

3. Premium rate varies by surety company.