In order to get a government contract in the state, you need to be bonded for at least the amount of contract. Think of it as insurance on the contract, John Harmon said.
Harmon, the head of the African American Chamber of Commerce of New Jersey, knows the bonding issue is one of the biggest obstacles for small businesses — especially small businesses owned by Black and brown owners — to get these much-desired contracts. He also knows that getting bonded is not as difficult as some realize.
It’s the reason the African American Chamber is joining with the New Jersey Economic Development Authority to start another cohort of the Small Business Bonding Readiness Assistance Program.
The cohort, which will begin the program at the end of the month, still has a few openings. Harmon encourages any small business interested in becoming eligible to sign up.
“The bond, in essence, is a credit insurance instrument,” he said. “If someone gets a $200,000 contract and doesn’t finish the project, that bond will get someone to replace that company and finish the project.
“It’s the assurance that taxpayer money will deliver on what was promised.”
Harmon said the program can be a game-changer for small-, minority- and women-owned businesses, as they will learn how to prepare to obtain bonds, a crucial step in competing for state and federal contracts.
Harmon said the program provides a comprehensive series of classes, workshops and strategic counseling sessions covering a variety of topics relevant to small businesses in all sectors, including bonding and insurance, business development, financial presentation, construction and contract law, construction management, estimating and credit.
“We’re looking at their finances, we’re looking at how they manage projects — have they completed projects, have they completed projects on budget?” he said. “We’re looking to see if they conducted themselves in an ethical way.”
At the end of the program, all participating businesses receive a Bonding Readiness Segment Report, which provides an in-depth assessment of their strengths and weaknesses to help them plan for the future.
And, if companies are not ready, the program helps puts companies on a path to success.
The program last 24 months — there is eight months of classwork, then follow-up monitoring. Companies, however, can be bonded much sooner, provided their affairs are in good order.
The last cohort, a virtual program that ended in November, had 40 companies that hailed from all parts of the state, including Atlantic City, Camden, Trenton and Newark. Twenty-three of the 40 small business owners already had received confirmation that they would be favorably considered for bonds ranging from $100,000 to $750,000 by their graduation.
Since the Small Business Bonding Readiness Assistance Program’s inception in 2018, 67 small-, minority- and woman-owned businesses have participated, and more than 46 have qualified for $20.8 million in surety bonding.
“Companies often are amazed at the process,” Harmon said. “There’s a misconception that small business cannot get a rating.”
Harmon said the program will help change misconceptions about small businesses — especially those from underserved communities.
“Bonding takes away some of the excuses from businesses, when these small businesses are looking to do business with them,” he said. “It says, ‘This business is bondable.’ That means that business has been vetted and they’re in good standing.”
The success rate of the program is solid and bonding can happen quickly — Harmon said one company was able to be bonded for $500,000 in just a week — but there are no guarantees.
“We’re going to put companies on a remedial track and try to help them get to a better place, but they have to be committed to their own success,” he said. “If you are committed, we’re halfway home.”
Final bond approvals will be conditional upon contract terms and bond forms, confirmation of satisfactory financing and a favorable review of the underwriting information at the time the small business actually requests the bonds.
The state, however, is fully behind the program.
Gov. Phil Murphy has prioritized supporting minority- and women-owned businesses and has called the Small Business Bonding Readiness Assistance Program an important mechanism for leveling the playing field among entrepreneurs vying for state contracts.
“Study after study has shown that COVID-19 has disproportionately affected businesses owned by people of color, making programs like the Small Business Bonding Readiness Assistance Program absolutely essential to helping New Jersey recover from the pandemic in an equitable and inclusive manner,” he said.
“The NJEDA has been a phenomenal partner for us and for the small business community as a whole even before the pandemic and has become a centralized force in helping the Garden State’s economy reemerge stronger than ever.”