What is a California Contractors License Bond?
California law requires all contractors who perform work that’s valued higher than $500 to obtain a license from the Contractors State License Board (CSLB) at the Department of Consumer Affairs. To obtain their license, applicants must also get a contractors license bond when applying.
In accordance with Business and Professions Code Section 7071.6, all three types of contractors in California (General Engineering Contractor, General Building Contractor, Specialty Contractor) are included in this requirement.
The California contractors license bond guarantees that since the contractor is licensed, they will comply with the Business and Professions Code of California.
If a contractor should violate the code, the bond also provides legal recourse to those harmed by the contractor’s actions: clients and the state. In this instance, a claim against the bond can be filed by the affected parties.
Contractor license bonds are like an agreement between the contractor (the bond principal), the clients and the state (the bond obligees) and the surety bond company that issues the bond. This makes it binding for the surety to investigate a claim if one is filed. If the claim is legitimate, the surety will compensate the affected party up to the full amount of the bond.
Based on the surety bond agreement, the contractor must then indemnify the surety for its compensation and repay it in full. This makes claims highly undesirable and means that causes for claims are best avoided.
What about bond cost? Read on below for the facts.
California Contractors License Bond Cost
The cost of your bond is a fraction of the full amount of your bond. The bond amount is the maximum amount of compensation that a surety may extend in the case of a claim.
State law requires contractors to post a $15,000 California contractors bond. In some cases, an additional Bond of Qualifying Individual in the amount of $12,500 may be required of contractors.
So how is the bond cost determined? Sureties offer a premium for bonds based on the financial stability and health of an applicant. In determining the premium rate, they place a priority on personal credit score. They often also consider an applicant’s personal and business financial statements, as well as other indicators of financial status. Credit score remains the most important one, though.
Applicants with a high credit score can typically expect a rate that is between 0.75% and 2.5% of the full bond amount. In other words, with a good credit score you can get your $15,000 bond at a cost of $113, up to $375.
Your choice of surety bond agency also matters. Not all agencies offer the same rates, because they work with different surety companies.
For years, we at Bryant Surety Bonds have been working only with A-rated and T-listed companies. What makes these companies stand out from the rest is that they are among the best sureties in the U.S. They are therefore able to offer some of the best rates on bonds possible. By getting your bond here, you will be backed by them.
Bad Credit Bonds
Getting bonded with us, even if you have a bad or nonexistent credit score, is no problem.
Not all sureties are willing to write bonds to low-credit applicants. Thanks to our great surety partners, we are able to offer bonds to these applicants through our Bad Credit Program. This allows you to finalize your licensing application and do the work you want to do as a contractor.
Obtaining a bond under this program costs slightly more than bonds at standard market rates. Your exact cost will be determined when you apply, but you are guaranteed to receive the lowest possible rate on your bond for your individual circumstances.
How to Get a California Contractors License
To get a California contractors license, you will need to fill in a license application and submit a number of supporting documents. You may also need to pass a state-administered exam, unless you have enough experience that you can obtain waiver for this requirement.
Furthermore, you’ll need to provide fingerprints and a criminal background check, as well as pay a $300 application fee and a $180 fee if your application is accepted. Finally, you will be required to obtain your contractor license bond and proper insurance.
Make sure to comply with all the requirements and fill in your application diligently. Up to 45% of applications are rejected each year simply because they’re incomplete.
How to Get Your California Contractors License Bond
To get your California contractors license bond or simply to apply for a free quote, fill in and submit our easy online surety bond application.
We’ll process your application and contact your with your free quote, as well as guide you through the next steps if you would like to get bonded.
You can always speak to your experts at (866)-450-3412 if you have any questions and require further information concerning the bonding requirements for contractors in California. Don’t hesitate to call us; we’ll be happy to help you!