- Required by your state or local government to get licensed
- The bond is usually filed with your license application or license renewal
- Bond form and amount vary by location and license type
Contractors are generally required to be registered or licensed with their state or local authorities, and a contractor license bond is usually required in the process.
A surety bond, in essence, is an agreement between three parties: the principal (your contractor business), the obligee (the entity requiring the bond, usually the state), and the surety (the bond provider). It acts as a guarantee that you will comply with all regulations imposed by your local authorities.
There are other construction bonds such as bid, performance and payment bonds, but they are different from a contractor license bond. The license bond concerns general compliance with the statutes of your license, while the other three types of bonds are posted for a specific project. They serve as a guarantee that you will follow your contractual obligations under a specific project, such as completing your work, or paying your subcontractors or suppliers as agreed.
A contractor license bond is like a surety line of credit for your business, providing extra protection for your customers that you will fulfill your work fully and diligently. In order to issue your bond, a surety needs to take a good look at your financials and business, to judge whether you can successfully fulfill your obligations.
If you fail to comply with regulations, which then causes damage to a party covered by the bond, a claim can be filed. If your actions are proven as unlawful, the surety will cover the immediate costs up to the penal sum of the bond. However, you will have to reimburse it soon after, as per the indemnity agreement that is a part of the bonding process.
The cost for your contractor license bond, or the bond premium, is usually between 1%-4% of the bond amount. For example, if you’re required to post a $10,000 contractor license bond, you might pay between $100 and $400.
The percentage will depend on your personal and business status: credit score, financial statements and business experience. If your overall condition is good, you’ll have to pay less.
Additionally, each state and local authority has different requirements regarding the bond amount.
How can you decrease your bond cost?
There are a few effective ways that can help you lower your bond cost:
With Bryant Surety Bonds, you can get access to exclusive bonding rates. We foster strong relations with numerous A-rated, T-listed surety companies, which allows us to shop around for the best rate for your particular case.
To get a ballpark estimate of your contractor license bond, you can use our surety bond cost calculator on the right side of the page.
If you have more questions on how surety bond costs are determined, feel free check our surety bond cost section.
For many contractors with lower credit score or past bankruptcies, tax liens or court cases, getting bonded can seem like an impossible dream. Many sureties turn down these high-risk applicants.
If you’re in a similar situation, Bryant Surety Bonds’ bad credit program can help you get bonded. We operate this program in order to allow contractors with less-than-perfect credit, or other financial troubles to get bonded and be able to stay in business.
The bond premiums for the high-risk market are a bit higher, in the range of 5%-7.5%. They are still a great opportunity to get bonded and licensed, which allows you to work and improve your credit score organically.
To start your bonding process today, just apply online to get your free, no-obligations quote, or call us at (866)-450-3412. If you need assistance with your application, our bond experts will be happy to help.
In order to provide you with the best bonding rate, we’ll have to take a look at your personal and financial documents. This way we’ll be able to make an accurate judgment of your overall business status, and give you your exact bond premium.
Bond forms vary across states and municipalities; make sure you get the right one from your local authorities. Once you get the completed bond, we recommend that you make a copy for yourself before submitting it to the relevant authorities.