Find Legal Information

20 ILCS 3520/ Small Business Surety Bond Guaranty Act.

(20 ILCS 3520/1)     Sec. 1. Short title. This Act may be cited as the Small Business Surety Bond Guaranty Act. (Source: P.A. 88‑407.)

    (20 ILCS 3520/5)
    Sec. 5. Definitions.
    "Contract term" means the term of the private sector, government, or utility contract, including a maintenance or warranty period of up to 2 years from the date on which final payment under the contract is due.
    "Department" means the Illinois Department of Commerce and Economic Opportunity.
    "Fund" means the Small Business Surety Bond Guaranty Fund.
    "Principal" means (i) in the case of a bid bond, a person bidding for the award of a contract, or (ii) the person primarily liable to complete a contract for the obligee, or to make payments to other persons in respect of the contract, and for whose performance of his obligation the surety is bound under the terms of a payment or performance bond. A principal may be a prime contractor or a subcontractor.
    "Program" means the Small Business Surety Bond Guaranty Program created by this Act.
(Source: P.A. 94‑793, eff. 5‑19‑06.)

(20 ILCS 3520/10)     Sec. 10. Powers. For purposes of this Act, in addition to other powers described herein, the Department may do each of the following:         (1) Use the services of other governmental agencies.         (2) Contract for and accept (for use in carrying out

the provisions of this Program) loans and grants from the federal, the State, or any local government and any of their respective agencies and instrumentalities.

(3) Acquire, manage, operate, dispose of, or

otherwise deal with property, take assignments of rentals and leases, and make contracts, leases, agreements, and arrangements that are necessary or incidental to the performance of its duties, upon any terms and conditions that it considers advisable. All property acquired under this Act that is not held as collateral shall be transferred to the Department of Central Management Services to sell in accordance with the State Property Control Act. All sale proceeds less sale expenses shall be deposited into the Small Business Surety Bond Guaranty Fund.

(4) Prescribe or approve the form of and terms and

conditions in applications, guaranty agreements, or any other documents entered into by the Department, principals, or sureties in connection with the Program.

(5) Acquire or take assignments of documents

executed, obtained, or delivered in connection with any assistance provided by the Department under the Program.

(6) Fix, determine, charge, and collect any

premiums, fees, charges, costs, and expenses in connection with any assistance provided by the Department under the Program.

(7) Adopt rules and regulations necessary to carry

out the purposes of the Program.

(8) Investigate the availability of and, if

desirable, purchase insurance to support the surety guaranty.

(9) Operate the Program by means of financial

intermediaries in a like manner as provided in the Small Business Development Act.

(Source: P.A. 88‑407; 88‑665, eff. 9‑16‑94.)

(20 ILCS 3520/15)     Sec. 15. Small Business Surety Bond Guaranty Fund.     (a) The Small Business Surety Bond Guaranty Fund is created as a special fund in the State treasury.     (b) The following shall be deposited into the Fund:         (1) Moneys appropriated by the State to the Fund.         (2) Premiums, fees, and any other amounts received

by the Department with respect to bonding assistance provided by the Department under the Program.

(3) Proceeds from the sale, lease, or other

disposition of property or contracts held or acquired by the Department.

(4) Any other moneys made available under the

Program or pursuant to the provisions of paragraph (2) of Section 10.

(c) The Fund shall be used as follows:         (1) For the purposes described in this Act.         (2) To pay the expenses of the Department in

administering this Act.

(Source: P.A. 88‑407; 88‑665, eff. 9‑16‑94.)

(20 ILCS 3520/20)     Sec. 20. Surety guarantees.     (a) Subject to the restrictions of this Act, the Department, on application, may guarantee any surety up to 90% of its losses incurred under a bid bond, a payment bond, or a performance bond on a contract of not more than $500,000 for each bond on any contract with the federal, the State, or any local government, with a member of the private sector, or with a utility regulated by the Illinois Commerce Commission. The amount guaranteed on the bond may vary based upon the size and type of job, reputation of the vendor, and other factors the Department considers relevant.     (b) The term of a guaranty under this Act may not exceed the contract term.     (c) The Department may vary the terms and conditions of the guaranty from surety to surety or contract to contract based upon the experience the contracting agency and the Department have had with the principal and the surety involved. The Department may require annual or quarterly progress reports from the contracting agency. The contents of the reports shall be specified by rules and regulations.     (d) The Department may not approve a guaranty under this Act unless the Department considers the contract for which a bond is sought to be guaranteed to have a substantial economic impact. To determine the economic impact of a contract, the Department may consider (i) the amount of the contract, (ii) the number of new jobs that will be created or existing jobs that will be retained, (iii) the economic condition of the area where the work will be performed or where the principal is headquartered, and (iv) any other factors the Department considers relevant.     (e) The funds that guarantee each bond shall be obligated from the Small Business Surety Bond Guaranty Fund when the performance bond is written, and de‑obligated after the bond liability is released for performance bonds and after the period for filing claims has expired for payment bonds. Those funds shall be released when the bond is reported as not low for bid bonds.     (f) The maximum amount of outstanding guarantees for all principals shall not exceed 3 times the amount appropriated for the program in the then current fiscal year. No principal may have outstanding at any one time guarantees exceeding 20% of the Department's maximum guaranty limit. (Source: P.A. 88‑407; 88‑665, eff. 9‑16‑94.)

(20 ILCS 3520/25)     Sec. 25. Surety bonding line. In addition to its other powers, on application, the Department may establish a surety bonding line in order to guarantee multiple bonds to a principal within preapproved terms, conditions, and limitations. (Source: P.A. 88‑407; 88‑665, eff. 9‑16‑94.)

(20 ILCS 3520/30)     Sec. 30. Requirements.     (a) To qualify for a surety bond guaranty under this Act, a principal must meet the requirements of this Section.     (b) The principal must satisfy the Department of each of the following:         (1) The principal is of good moral character; or if

the principal is not an individual, the principal is owned by individuals of good moral character.

(2) As determined from creditors, employers, and

other individuals who have personal knowledge of the principal, (i) that the principal has a reputation for financial responsibility or (ii) if the principal is not an individual, that a majority of the principal is owned by individuals with a reputation for financial responsibility.

(3) The principal is a resident of Illinois or has

its principal place of business in Illinois.

(4) The principal is unable to obtain adequate

bonding on reasonable terms through normal channels.

(5) The principal has a history of satisfactory

performance of contracts, or in the case of a new business, the principal has the knowledge and expertise reasonably necessary to assure performance of the contract.

(6) The financial condition and assets of the

principal are reasonably adequate to support the contract.

(7) The principal is a small business that has

assets, income, or employees that do not exceed limits established by the Department by regulation or administrative determination.

(c) The principal shall certify to the Department each of the following:         (1) A bond is required in order to bid on a contract

or to serve as a prime contractor or subcontractor.

(2) A bond is not obtainable on reasonable terms and

conditions without assistance under the Program.

(3) The principal will not subcontract more than 75%

of the dollar value of the contract.

(d) The Department may place a lien upon or otherwise encumber the principal's assets as collateral for the guaranty. (Source: P.A. 88‑407; 88‑665, eff. 9‑16‑94.)

(20 ILCS 3520/35)     Sec. 35. Application.     (a) To apply for financial assistance from the Program under this Act, a principal and surety shall submit to the Department an application on the form that the Department provides. The contents of the application shall be specified by rules and regulations.     (b) The application shall include, at a minimum, all of the following:         (1) A detailed description of the private sector,

government or utility project.

(2) An itemization of known and estimated costs.         (3) The total amount of investment required to

perform the private sector, government or utility contract.

(4) The funds available to the principal for working

capital.

(5) The amount of bonding assistance sought from the

Department.

(6) Information that relates to the inability of the

principal to obtain adequate bonding on reasonable terms through normal channels.

(7) Information that relates to the financial status

of the principal, including the following: (i) a current balance sheet, (ii) a profit and loss statement, and (iii) credit references.

(8) A schedule of all existing and pending contracts

and the current status of each.

(9) Any other relevant information that the

Department requests.

(c) After receipt of an application for assistance from the Program, the Department may determine that a principal must provide an audited balance sheet before the Department makes its decision on the application.     (d) If a principal has ever defaulted on any loan or guaranty provided by the Department, the Department shall refuse to approve a guaranty under this Act. The Department may also refuse to approve a guarantee if the principal has committed a felony. (Source: P.A. 88‑407; 88‑665, eff. 9‑16‑94.)

(20 ILCS 3520/40)     Sec. 40. Premiums and fees.     (a) The Department may set the premiums and fees to be paid to it for providing bonding assistance under the Program.     (b) The premiums and fees set by the Department shall be payable in the amounts, at the time, and in the manner that the Department requires.     (c) The premiums and fees need not be uniform among transactions and may vary in amount (i) among transactions and (ii) at different stages during the terms of transactions.     (d) A determination by the Department shall remain effective throughout the period during which the bonding assistance provided by the Department is in effect, provided there is no material change in the application as approved pursuant to Section 35. (Source: P.A. 88‑407; 88‑665, eff. 9‑16‑94.)

(20 ILCS 3520/45)     Sec. 45. False statements; penalty.     (a) No person shall knowingly make or cause any false statement or report to be made in any application or in any other document furnished to the Department.     (b) No person shall knowingly make or cause any false statement or report to be made for the purpose of influencing the action of the Department on an application for assistance or for the purpose of influencing any action of the Department affecting bonding assistance, whether or not that assistance may have already been extended.     (c) Penalty. A person who violates any provision of this Section is guilty of a Class 2 felony. (Source: P.A. 88‑407; 88‑665, eff. 9‑16‑94.)

(20 ILCS 3520/50)     Sec. 50. Study of "incubator". The Department is authorized to study the need for and to create a component for the Program to be referred to as the "incubator" of the Program. The Department is authorized to create the incubator in order to assist principals by identifying federal, State, local, and private sector resources. These resources, such as financial and management assistance, shall be designed to improve principals' ability to comply with a contract for which a guaranty is sought. (Source: P.A. 88‑407; 88‑665, eff. 9‑16‑94.)

(20 ILCS 3520/70)     Sec. 70. (Amendatory provisions; text omitted). (Source: P.A. 88‑407; text omitted.)

(20 ILCS 3520/75)     Sec. 75. (Amendatory provisions; text omitted). (Source: P.A. 88‑407; text omitted.)

(20 ILCS 3520/99)     Sec. 99. This Act takes effect upon becoming law. (Source: P.A. 88‑407.)