[Congressional Record Volume 153, Number 126 (Thursday, August 2, 2007)]
[Senate]
[Pages S10805-S10806]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE (for herself and Mr. Kerry):
  S. 1960. A bill amend the Small Business Investment Act of 1958 to 
improve surety bond guarantees, and for other purposes; to the 
Committee on Small Business and Entrepreneurship.
  Ms. SNOWE. Mr. President, I rise today o join Senator Kerry in 
introducing the Surety Bond Improvement Act, a bill which would 
reinvigorate the Small Business Administration's Surety Bond Guarantee 
program. I appreciate Senator Kerry's leadership on small business 
issues and his bipartisan work with me on this bill. Together, our 
primary purpose is to improve the Surety Bond Guarantee SBG program and 
ensure that more small businesses are able to secure the surety bonds 
they require to compete and grow.
  Many surety bond companies refuse to bond small businesses because of 
the greater risks associated with underwriting new, unproven firms. 
Countless new businesses lack the stable credit histories and assets 
necessary to obtain a surety bond. Without bonding, small firms cannot 
secure the contracts they need to survive. For many small businesses, 
their inability to obtain surety bonds creates a barrier to entry which 
prevents them from competing in defense contracting, construction, 
services, and other markets.
  In order to reduce the risk to the surety firms issuing the bonds, 
the SBA promises to cover between 70 and 90 percent of any possible 
claims on bonds underwritten through the SBG program. Many small 
contractors are only able to obtain surety bonds through the SBG 
program and establish a bonding history. Over time, these businesses 
will out-grow the SBG program and will be able to obtain bonds in the 
regular, competitive marketplace.
  It is critical to understand that the number of participating 
sureties in the

[[Page S10806]]

SBG program directly affects the number of small companies that can 
receive surety bonds. In fiscal year 2000, the SBG program had 
28 participating surety bonding companies and issued 7,034 bonds to 
small businesses. As of fiscal year 2006, there were only 10 
participating surety companies that issued 4,709 surety bonds. This 
downturn represents a 64 percent decline in the number of participating 
sureties and a decrease of 33 percent in the total number of bonds 
issued to small businesses. The sureties argue that SBA's outdated fee 
structure and other actions, such as unwinding bond guarantees and 
recent fee increases, make it impossible for them to earn a profit and 
continue participating in the program.

  Our bill strives to address the reason behind the program's 
diminishing participation and increasing inability to help small 
businesses. To achieve that goal, our measure would 1. prohibit the SBA 
from underwriting a surety bond guarantee after the agency has already 
underwritten and approved the bond, 2. direct the SBA to promulgate 
regulations to allow surety companies to go to non-binding mediation 
with the SBA in order to resolve disputes over denied claims or other 
issues, 3. eliminate existing price controls, 4. require the SBA to be 
transparent in its fee structure, 5. clarify that Congress does not 
require the Surety Bond Guarantee program to be entirely self-funding 
or self-sufficient, and 6. raise the principal guarantee amount to $3 
million.
  We are collaborating with the SBA to reverse the downward trend 
regarding participating sureties and boost the number of small 
businesses receiving surety bonding. To accomplish this goal, the SBG 
program is working to reduce approval times by bolstering the capacity 
of companies to submit underwriting applications and claim requests 
online. The program also plans to restructure its field offices and 
conduct outreach to new sureties and small businesses needing surety 
bonding. These reforms, along with the necessary legislative changes 
Senator Kerry and I have proposed today, will help the program attract 
new sureties and increase the overall number of small companies able to 
secure sureties underwriting through the program.
  I encourage my colleagues to strongly support the Surety Bond 
Improvement Act which we wrote after consulting with small business 
owners and surety bonding companies on how best to revitalize this 
pivotal program. Without these remedies, the number of sureties in the 
program will continue to fall as will the capability of small 
businesses to secure surety bonds. For new companies, obtaining a 
surety bond will become a onerous barrier to entry and competition that 
they will be unable to overcome. I urge my colleges to work with 
Senator Kerry and me to assist small businesses by passing this crucial 
legislation.
                                 ______