New Bill Grants Bonding Assistance to Small Businesses in New Jersey
A recently passed bipartisan bill in New Jersey has brought good news to small businesses that want to participate on public construction projects.
Senate Bill 123, signed by Gov. Chris Christie on Jan. 4, introduces a new program that will support small, minority-owned and women-owned businesses in the state through education and through funding when bidding on public or federal projects.
With 98 percent of businesses in the Garden State being small businesses, according to Christie in a press release issued by the New Jersey Office of the Governor, the provisions of Bill 123 are a needed improvement, he said.
This comes as small businesses involved in construction are sometimes unable to secure surety bonds to bid and perform on public or federal construction and improvement projects.
These businesses can struggle with obtaining the mandatory construction surety bonds due to the higher rates, as well as the strict requirements posed by surety bond companies. This can leave them unable to compete with bigger contractors who may be able to obtain the bond because of size and capacity.
By signing the new bill, Christie also stated he hopes it will increase competition for public contracts, leading to lower costs and a more diverse pool of small businesses performing public services.
One of the main provisions of SB123 is the creation of the Small Business Readiness Assistance Program, which will be led by the New Jersey Economic Development Authority (EDA). This program offers opportunities to small businesses to increase their understanding of the bonding processes and other business aspects related to it.
By offering workshops and strategic consulting sessions, the program will seek to improve the “financial presentation, operational efficiency, profitability and surety bonding capacity and knowledge” of small businesses, according to the bill. This in turn is expected to make them more competitive and able to take on public projects.
The program will also see the creation of the Small Business Bonding Readiness Assistance Fund. This fund will provide financing to an association that will offer support services and assistance to the businesses that participate in the program. Funding will also be provided to small businesses that have been approved to participate in the program so they can meet their surety bond requirements for construction bonds.
Another fund, the Enterprise Zone Assistance Fund, will be created as part of the program. This fund will work in conjunction with the New Jersey Urban Enterprise Zone program (UEZ).
The function of the fund will be to make available further resources for municipalities that qualify to the UEZ to undertake public improvements and economic development projects with the help of small businesses in the state.
Surety bonds are an agreement between the contractor, the state and the surety bond company. They guarantee that the contractor will perform work in accordance with the project contract as well as state or federal regulations for contractors.
In cases where there is a violation, financial compensation can be made available to projects owners who file a claim. In this way, surety bonds protect project owners and offer financial compensation if they suffer any damages or losses on their project.
Yet, surety bonds on larger projects can be expensive to obtain, which can be limiting to smaller businesses who don’t have the same financial capacity as big contractors. With this in mind, the aim of legislation such as the Small Business Readiness Assistance Program is to make surety bonds available to smaller contractors in hopes of leveling the playing field.
Todd Bryant is the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping business owners get bonded and start their business.