Magazine article Business Credit

Stringent Ohio MBE Bonding Program Assists Minority Businesses

Magazine article Business Credit

Stringent Ohio MBE Bonding Program Assists Minority Businesses

Article excerpt

Did you know that since 1980, the State of Ohio has supported a program to provide bonding to minority business enterprises (MBE) where bonding privileges were not available through surety companies due to lack of financial stability or other requirements? The program is administered by the Ohio Department of Development through its Minority Development Financing Commission (MDFC) and a Minority Business Bonding Program. It is funded by $10 million of unclaimed funds from the Department of Commerce which serves as a loss reserve for the bonds issued to the minority businesses. The bonds are issued for both private and public work within the state (Section 122.71 to 122.85 of the Ohio Revised Code).

The maximum bond per company is one million dollars. Normally the average bond issued is between $100,000 and $150,000. Currently seven to 10 companies each year have been pre-qualified for the program. However, the eligibility requirements are stringent:

1. The applicant must be certified by the EEOC as a minority business.

2. The applicant must meet the "Minority Business" definition, as set forth in Rule 127-1-01 of the Ohio Administrative Code as a person who is both owner and a business MBE certified by the State EEO coordinator.

3. Two separate surety companies must have denied bonding to the MBE within the past year and written evidence of that refusal must be submitted to the commission.

4. The project involved must be sound economically and be of benefit to the People of the State of Ohio.

5. Adequate insurance must be carried on the MBE operation and its key employees.

6. The applicant should demonstrate financial stability by having a line of credit equal to 20 percent of the bond amount requested. There are exceptions in lieu of this requirement extended by the Commission on a case-by-case basis. Personal guarantees and other collateral are sometimes required by the Commission to avoid possible default.

7. The applicant is assessed a premium for each bond not to exceed 2 percent of the penal sum of the bond. Should the contract change, the premium will be adjusted accordingly, up or down if the amount is changed by more than the lesser of 5 percent or $10,000.

8. There is no application fee for the Minority Business Bonding Program nor is there a fee for bid bonds if the company's bid is not successful. …

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