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Louisiana Bonding Assistance Program Available For Small Contractors

Program aims to help small construction companies gain greater access to major projects

BATON ROUGE, La. — Louisiana Economic Development is inviting small construction companies to take part in its Bonding Assistance Program as a means of gaining greater access to major construction projects across the state. Since 2016, the program has provided $1.3 million in guarantees for 22 contracts with a total project value of $12 million.

The Bonding Assistance Program aids a variety of disadvantaged businesses, including minority and woman-owned businesses, veteran-owned businesses and other small businesses in obtaining bid, payment and performance bonds required for construction opportunities throughout Louisiana. The program is open to contractors who are certified clients of LED’s Small and Emerging Business Development Program, or SEBD.

“The Bonding Assistance Program demonstrates LED’s priority of providing assistance to developing small construction companies in Louisiana,” LED Secretary Don Pierson said. “These companies go on to support the large contractors in the construction industry that, in turn, support a robust Louisiana economy. LED is committed to providing programs that support and build the fabric of our small business sector. It’s also important to note that this program not only provides the contractor with access to opportunity, but also supports growing a relationship between the contractor and the surety. This relationship is critical to the contractor’s future success.”

The inability to secure sufficient bonding capacity has presented a challenge for new and smaller companies in the construction industry. The Bonding Assistance Program supports firms that have the capabilities to perform a contract, but lack the bonding capacity, by helping establish their first bond or by increasing their bonding capacity.

For companies that qualify for the program, the state can guarantee the first 25 percent of the contract value, up to $100,000, to limit a surety company’s risk in providing a bond. The program covers bid bonds, which guarantee that a contractor will enter into a contract if awarded a bid; performance bonds, which guarantee that a contractor will perform the work as specified by the contract; and payment bonds, which guarantee that a contractor will pay for services and materials.

LED does not participate in underwriting any bonds. Surety companies determine whether to issue bonds based on standard underwriting criteria. LED’s role under the program guidelines is to provide project-specific collateral in the form of an irrevocable letter of credit to the surety company. That letter mitigates the risk in providing bonds to smaller companies that might otherwise have trouble obtaining bonds due to their size or limited portfolio. Upon successful completion of the project, the letter of credit is returned to the state and those funds can be used for future bonding assistance projects.

A video testimonial from a participant can be viewed at https://www.youtube.com/watch?v=sTL29yp_o2g. For more information about the Bonding Assistance Program, participating sureties, or agents, contact Cory Morgan of LED at 225.342.4317 or cory.morgan3@la.gov; or visit OpportunityLouisiana.com/BAP.

For more information about LED’s Small and Emerging Business Development Program, visit OpportunityLouisiana.com/SEBD.

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