New Fund Helps Small Louisiana Contractors
12/19/2023
 By Louisiana Economic Development
BATON ROUGE—Louisiana Economic Development is making a new form of financial support available to contractors through its Bonding Assistance Program, which Governor John Bel Edwards relaunched in 2016 to support emerging, minority and woman-owned, veteran-owned, and other small businesses.  Early stage companies can be stymied in their efforts to secure construction contracts because large projects require significant bonding capacity that young companies often lack. In the eight years since it was revived, the BAP has provided risk mitigation through a partnership between LED and bond issuance companies, resulting in more than thirty Louisiana small businesses securing over $30 million worth of construction contracts. The addition of a default mitigation fund will further level the playing field by helping certified small and emerging construction businesses receive bonding at reasonable rates by reducing the surety’s risk.
“Cash flow is a really tough issue for small and emerging businesses attempting to qualify for bonding for the first time,” LED Assistant Secretary Brenda Guess said. “This new program helps eligible companies cover a potential shortfall in the early stages of their project—a time when companies face financial stress due to the demand of increased equipment needs and the purchase of materials. Should cash flow issues manifest during construction, this fund will keep construction contracts out of default as the project work continues, allowing for production of revenues in later contract phases.”
The Bonding Assistance Program offers up to a $100,000 guarantee, or twenty-five percent of the total contract, whichever is less, for three types of bonds:
Traditional bid bonds—guarantee that a contractor will enter into a contract if awarded a bid
Performance bonds—guarantee that a contractor will perform the work as specified by the contract
Payment bonds—guarantee that a contractor will pay for services and materials
The default mitigation fund will provide recipients up to $40,000 of that guarantee, or ten percent of the contract price, whichever is less, in mitigation funds. The funds can only be used to prevent default, and cannot be used for project mobilization.
“The default mitigation fund allows us to support a broader range of businesses, including those that have not historically had access to bonds,” LED Secretary Don Pierson said. “With this new fund, we are increasing the diversity of contractors who get bonded in our state, and improving equity among business owners, particularly owners of small and early-stage construction companies.”
Contractors must first become certified in LED’s Small and Emerging Business Development Program to be eligible for the Bonding Assistance Program guarantees and default mitigation funds. The surety company will issue bonds should the contractor receive a favorable underwriting result.
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.
About Louisiana Economic Development
Louisiana Economic Development (LED) is responsible for strengthening the state’s business environment and creating a more vibrant economy. It is the only state agency in the United States accredited by the International Economic Development Council, boasting award-winning programs like LED FastStart, a longtime national leader in customized workforce development. LED also supports a wide range of higher ed partnerships that Business Facilities magazine recently credited for Louisiana’s ranking as the Number One Tech Talent Pipeline in the United States. In 2022, LED attracted fifty-three new economic development projects representing 18,137 new direct, indirect, and retained jobs and $20.7 billion in new capital investment. Explore how LED cultivates jobs and economic opportunity for the people of Louisiana and employers of all sizes at OpportunityLouisiana.com.
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