Securing credit is a major obstacle to small businesses, especially those owned by women and minorities, and especially contractors. To try to help these contractors get credit and get state construction and transportation business, New York state has launched a surety bond assistance program.
The program also provides training and technical support to help these businesses secure surety bonds for contracts with the state government.
When a business needs a bond from a surety company to secure a contract, the program will provide letters of credit for up to 30 percent of the contract amount. These letters are essentially guarantees provided by the state to the surety company on behalf of the contractor.
It is estimated that the program will create 2,200 jobs over the next several years, to increase personal income by $137 million and economic output by $328 million.
A business can apply to the program before or after seeking surety bonding. The maximum government contract size is $2 million. The applicant must be a small business or minority or women-owned business in New York state for at least two years.
The business must have had minimum average gross revenue of $400,000 in either of the previous two years and maximum gross revenue of not more than $5 million in the most recent year. The business must have previous experience completing a similar scope of work.
The company applying for the letter of credit will be charged an annual fee of less than 1 percent of the bond value. There is no cost for the training or technical assistance.
Two surety bond companies, Travelers and ACE, both of which have A-plus ratings, have agreed to take part in the program.
Gov. Andrew Cuomo, who announced the plan in his 2012 State of the State address, said, “New York”™s strength is the diversity, innovation and entrepreneurship of all its residents. By breaking down barriers to growth for MBWEs, we are putting that strength to work for all New Yorkers, building a more diverse and competitive business climate. These steps will level the playing field and open up doors for greater economic opportunity and job growth in communities that need it most.”
