SBA moves to help contractors
The game is bonds -- surety bonds.
For those of you not up on your insurance lingo, a surety bond is a promise that payment will be made if certain work isn’t performed. For small construction companies trying to win government contracts, this specialty insurance product can mean the difference between landing a bid and losing it.
For the many that don’t qualify for an off-the-shelf product, the Small Business Administration offers a bond guarantee program.
The trouble is, too few small firms know about it and not enough bond companies participate in it.
To help remedy that, the agency instituted changes effective July 25 meant to reinvigorate the program.
Bond companies can now charge higher rates and will be subject to less frequent SBA audits. Small firms owned by military veterans now are eligible for the highest 90% guarantee offered by the SBA. And an electronic application is in the works.
“These will be useful tools,” said Thomas Ewbank, who heads the SBA surety bond program for California and seven other Western states, as well as Guam.
A corporate surety bond, including bid, payment and performance bonds, protects a project owner if a contractor defaults on a construction assignment.
Ewbank would like to see more small firms like Q-Max Construction Co. of Fullerton take advantage of the program.
Owners Elena and Amer Ari have tapped the SBA bond guarantee program 15 times since 2004 to qualify for the performance bonds necessary to win bids on remodeling work for the Navy.
Like most small start-ups, the Aris didn’t have the performance record or credit history needed to qualify for an off-the-shelf surety bond.
“It’s just a great opportunity for small businesses to grow, improve and make it in the business world,” said Elena Ari, director of business development. “We are very appreciative of that.”
The company is now financially strong enough to graduate to non-SBA guaranteed bonds, she said. Initial calls have suggested that the firm will save money in the open market. Q-Max will also then be free of the $2-million contract limit set by the SBA.
The construction company is one of the 400 or so small firms served by the SBA’s Western bond office each year.
Most use the program’s “prior approval” process, which requires an insurance agent to send a bond application to the agency to review and approve. Those bonds provide a 90% guarantee for contracts worth $100,000 or less.
For contracts above that, up to the $2-million limit, the guarantee is 80%. Minority-owned businesses, and now vets, qualify for a 90% guarantee.
The other type of bond guarantee is offered under the preferred surety bond side of the program. Approved bond companies can issue SBA-guaranteed loans without prior approval from the agency, but the guarantee is lower, 70%. Those companies tend to work with larger construction firms in the small-business realm, although the $2-million contract cap still applies.
One expert doubts that the SBA’s changes will significantly boost participation in the program, largely because they don’t adequately address the real engines of the process: the insurance agents.
Too many view the SBA program as a hassle, either through firsthand knowledge or by reputation, said Adam Pessin, executive vice president of American Contractors Indemnity Co. of Los Angeles. He said the company issued about 70% of the region’s SBA-guaranteed surety bonds.
“More readily and actively engaging the agents” is the key to expanding the bond guarantee program, Pessin said.
For more information on the SBA program, including a list of local participating agents, contact Glen Constantino, assistant director of the SBA’s Los Angeles office, at (818) 552-3210.
Anti-harassment training rules
If your California small business regularly employs 50 or more people, including temporary workers and independent contractors, state law requires you to provide training for your supervisors to guard against sexual harassment.
Under the final version of the training regulations, which will go into effect Aug. 17, employers can use online tools to offer the training.
Though typically cheaper than in-person workshops, e-training has been controversial since 2004, when the training mandate -- Assembly Bill 1825 -- was passed by the Legislature.
The final rules, issued last month by the Fair Employment and Housing Commission, allow interactive individual computer-based training as well as real-time “webinars.”
At least one expert still believes in-person training is more useful.
“The good old-fashioned face-to-face is more effective, especially in this type of thing,” said Elizabeth Ison, a trainer and principal at the Ison Law Group, an employment law firm in Sacramento.
The real learning often takes place during the questions and answers that arise when discussing sample cases, said Ison, who charges $1,500 for two hours of in-person anti-sexual harassment training.
Although many small businesses can’t afford in-person training, they should ensure that their supervisors are trained.
There are no fines for ignoring the regulation, but business owners leave themselves exposed to potential legal liability, she said.
“If you get sued and haven’t done sexual harassment training, you can kiss the one affirmative defense you have goodbye. It’s not going to look good,” Ison said.
She also advises employers to take a broad view of the term “supervisor.” Even those with temporary supervisory duties, such as an assistant or secretary, could fall under the definition and require training, she said.
For details on the regulation, go to www.fehc.ca.gov.
