Louisiana Bonding Assistance Program Touted For Its Inclusion of Small Contractors

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 in the state.

The Bonding Assistance Program aids disadvantaged businesses, 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. Contractors that are certified clients of LED’s Small and Emerging Business Development Program are eligible to utilize the Bonding Assistance Program.

“A strong Louisiana economy depends on Louisiana small businesses securing work for themselves and their employees,” LED Secretary Don Pierson said. “This program is a tool to help qualified small businesses in the construction arena to grow and thrive by helping address a major obstacle – gaining access to performance bonds. LED is happy to provide this enhanced opportunity and technical assistance to Louisiana’s small businesses. This is an important pathway which will allow them to take advantage of the robust construction opportunities throughout the state.”

Construction is big business in Louisiana, but newer and smaller subcontractors often find it hard to work for prime contractors on substantial projects because they lack bonding capacity. The program seeks to assist small construction companies in Louisiana that do quality work but do not possess sufficient collateral to obtain the bonds needed to secure contracts on construction jobs.

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 get involved 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.

LED partners with the Louisiana Public Facilities Authority and the Louisiana Surety Association to operate the program.

For more information about the Bonding Assistance Program, participating sureties and agents, visit OpportunityLouisiana.com/BAP.

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

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