By law, prime contractors to the federal government must post surety bonds on federal construction projects valued at $100,000 or more. Many state, county, city and private-sector projects require bonding as well. The SBA can guarantee bid, performance and payment bonds for contracts up to $1.25 million for small businesses that cannot obtain bonds through regular commercial channels. Bonds may be obtained in two ways:
- Prior Approval -- Contractors apply through a surety bonding agent. The guaranty goes to the surety.
- Preferred Sureties -- Preferred sureties are authorized by the SBA to issue, monitor and service bonds without prior SBA approval.