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An Obscure Kind of Insurance That Hinders Small Businesses 09/12/2012


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Constantly stuck between a rock and a hard place,” is how Dominic Dunlap describes his business, DCG Roofing Solutions. Finding work isn’t the problem: There are all kinds of government contracts to be grabbed near his Des Plaines, Ill., headquarters. The problem is getting a bond to qualify as a bidder for the contracts. If you can’t get a so-called surety bond — the insurance that covers the government if something goes wrong — you aren’t invited to the party.

There’s a lot of jawboning about giving more government work to small businesses, the firms most vulnerable to the slowdown. But a government project worth more than $150,000 almost always requires a bond. “Bonding is always an issue for small business,” says Joe Flynn, program director for Tennessee’s Procurement Technical Assistance Center, one of the country’s 300 centers established to help local businesses qualify for government work.

The federal government asks its agencies to set aside 23 percent of their contract work for small businesses. But for many firms, it’s a helping hand they can’t reach. “I hear this over and over from every small contractor,” says Mark Yarbrough, a city council member in Perris, Calif., who has a small automotive business. Bond issuers, meanwhile, “are looking to draw blood, looking to disqualify you,” adds Dunlap.