The Bonding Barrier: Why the Most Qualified Hispanic Contractors Still Cannot Win the Bid

There are 70,000 Hispanic-owned construction businesses in the United States. Thousands of them have the experience, the crews, and the equipment to perform public works contracts. A significant number of them cannot get on the bid list because they cannot secure a surety bond.

This is not a competence problem. It is a capital access problem. And it is costing American taxpayers some of the best contractors in the country.

The surety bonding gap is a documented structural barrier. Forty-three percent of minority-owned construction businesses report that bonding capacity is their primary barrier to bidding public sector work, compared to 19 percent of non-minority-owned firms, according to the Associated General Contractors' 2025 survey of small and emerging contractor firms. The SBA Surety Bond Guarantee Program was designed to close that gap, but it remains underfunded, underknown, and structurally difficult to access for the firms that need it most.

What Surety Bonding Is and Why It Matters for Public Works Contracts

Performance bonds and payment bonds are standard requirements on federal, state, and most municipal construction contracts. The Miller Act of 1935 requires both types of bonds on all federal construction contracts above $150,000. Nearly every state has a comparable requirement for public projects. A performance bond guarantees that the contractor will complete the project according to specifications. A payment bond guarantees that subcontractors and suppliers will be paid.

To secure these bonds, a contractor must work with a surety company, which functions like a specialized insurance provider. The surety evaluates the contractor's financial statements, credit history, working capital, and project backlog before issuing coverage. Most surety underwriters use a simple formula: a contractor's bonding capacity is roughly ten times their net working capital. A firm with $500,000 in working capital can typically bond $5 million in work. A firm with $100,000 in working capital is limited to $1 million, regardless of how many successful projects they have completed.

That formula is where the barrier begins.

Why Hispanic-Owned Firms Are Disproportionately Affected by the Bonding Gap

Hispanic-owned construction businesses are, on average, younger firms with smaller balance sheets than their white-owned counterparts. This is not because of inferior business management. It reflects decades of unequal access to business credit, SBA lending, and the retained earnings that come from intergenerational wealth transfer.

The Federal Reserve's 2024 Report on Employer Firms found that Hispanic-owned businesses were approved for full loan amounts at a rate of 49 percent, compared to 68 percent for white-owned businesses. The approval gap exists even when controlling for business age and revenue. When a contractor cannot access credit, working capital stays thin. When working capital stays thin, bonding capacity stays low. When bonding capacity stays low, the contractor cannot bid the public work that would build the balance sheet to increase bonding capacity. It is a closed loop.

The SBA Surety Bond Guarantee Program was designed to address exactly this problem. The program provides guarantees on bid, performance, and payment bonds for small businesses that cannot access the surety market directly. The guarantee covers up to 90 percent of the surety's losses on qualifying contracts. In fiscal year 2023, the program supported $3.2 billion in bonded contracts for small businesses across the country, according to SBA data.

That is meaningful. It is not enough.

What the Bonding Data Shows About Hispanic Contractor Exclusion from Public Works

According to the Associated General Contractors' 2025 survey of small and emerging contractor firms, 43 percent of minority-owned construction businesses reported that bonding capacity was the primary barrier to bidding public sector work, compared to 19 percent of non-minority-owned firms. Among Hispanic-owned firms specifically, bonding capacity ranked above licensing, workforce availability, and equipment access as the top barrier.

The U.S. Government Accountability Office reviewed the SBA Surety Bond Guarantee Program in 2023 and found that program awareness among small minority-owned contractors remained low, particularly in rural and mid-sized markets. Many contractors reported learning about the program only after they had already lost bids they were otherwise qualified to win.

Awareness is not the only issue. The program's application process requires audited or reviewed financial statements, which many small contractors do not routinely produce. Preparing them costs money the contractor may not have. The fee structure, while subsidized, still adds to project overhead on contracts where margins are already tight.

HCC's 2026 State of Hispanics in Construction Report documents the full scope of this barrier, including regional data on bonding access gaps, contractor survey findings, and the cumulative economic cost of excluding qualified Hispanic firms from the public market.

Three Policy Changes That Would Open Public Works Bidding to Hispanic Contractors

HCC has been pushing for three changes at the federal and state level, and we will keep pushing.

First, the SBA Surety Bond Guarantee Program should be expanded. The current aggregate limit for any single contractor is $10 million. For a firm trying to grow into public market work, that limit is often the ceiling, not the floor. Congress should raise it to $25 million and increase funding for the Preferred Surety Bond Program, which allows select surety companies to approve guarantees without waiting for SBA review, cutting processing time from weeks to days.

Second, states that use federal transportation and infrastructure dollars should be required to provide technical assistance on surety bonding to small and minority-owned contractors as a condition of those funds. Some states already do this voluntarily. None of them should be doing it optionally.

Third, the construction industry's prime contractors need to take bonding mentorship seriously. Large general contractors routinely carry enormous bonding capacity. When they mentor emerging subcontractors, help them build financial statements, and co-bond early projects to establish a track record, they build the subcontractor market that makes their own work possible. This is not charity. It is vertical supply chain development.

The contractors who cannot get on the bid list are not unqualified. They are undercapitalized because of barriers that predate them. Fixing this does not require new money. It requires the will to direct existing resources toward the contractors who have been waiting longest for a fair chance at public work.

HCC publishes the 2026 State of Hispanics in Construction Report as the industry's reference point for data on Hispanic contractor participation, bonding access, and public market barriers. Policymakers, prime contractors, and surety professionals who want the full data set can request it directly through HCC.

George Carrillo is the CEO of the Hispanic Construction Council, a Marine veteran, and a former Director of Social Determinants of Health.

Sources: Associated General Contractors, 2025 Survey of Small and Emerging Contractor Firms. Federal Reserve, 2024 Report on Employer Firms. U.S. Small Business Administration, Surety Bond Guarantee Program FY2023 Annual Report. U.S. Government Accountability Office, Review of SBA Surety Bond Guarantee Program, 2023. Miller Act, 40 U.S.C. 3131 (1935). HCC, 2026 State of Hispanics in Construction Report.