Contractor License Bond Requirements

Starting a Construction Company, This is What You're Going to Need

In the process of registering your company as a construction contractor, you will need a contractor license bond. It is usually one of the requirements for issuing a license to a contractor within a state. A contractor license bond is essentially a surety bond that acts as a guarantee that you will abide by all the laws and regulations stated by your local regulatory bodies.

It also acts as a surety or credit line ensuring that your clients are protected and assured that you will carry out your work to the highest professional standard possible.  Here is more information on why they are necessary.

Contractor license bond requirements vary from state to state and you will need to apply to get access to these conditions.

Personal and Financial Documents

Your finances will be studied closely to make a precise judgment of your business status. This will allow the bonding company to give you an exact premium based on your credit score. This credit score reflects the state of your finances and could affect the amount of premium you will pay as bonding companies are always careful when giving out bonds. In some cases, the applications are rejected out rightly.

Bond Application

Apply for your bond online and get approval once you’re clear with the documentation required for your bond. It is usually a fast process and you should be done within minutes unless you have problems with the conditions required in your state. Check for state requirements before proceeding with such applications.

• Sign And Submit
Immediately after receiving the contractor license bond, you should sign it, make a personal copy and send the signed document to the relevant state board or agency. These agencies are different in many states but you should get your license within 3 weeks of submission.

• Cost of Contractor License Bonds
Your contractor license bond isn’t free and it will cost you 0.75% to 2.5% of the overall amount of the bond you posted. The actual percentage will depend on your credit score, business experience, and financial statements. The amount could also differ depending on the state you’re working in.

Contractor license bond requirements are mostly background checks to determine if your business is running within the provisions of the law. Bankruptcy, bad credit, and ongoing litigation can affect your application of a contractor license bond as many sureties do not feel secure granting bonds to such high-risk applicants.

In certain cases, bonding companies charge higher premiums between 5% and 10% for high-risk contractors who have a bad credit score or a history of financial trouble. It is a subtle way of protecting themselves if the company folds up unexpectedly or incurs significant losses due to incompetence or failure to complete a job.

Starting a Construction Company, This is What You're Going to Need

Starting a Construction Company, This is What You’re Going to Need

At a point in your career, you may decide that it is time to quit working for someone else and start your own business enterprise. This could be a franchise, store or company completely owned by you. While it is an exciting period due to the new journey ahead of you, it is also a challenging one because you’re basically going into uncharted territory. There are statutory requirements that must be met as well as difficult decisions to be made not to mention the risks that come with starting anything new. If you’re inclined towards the construction sector and you’re thinking of starting a construction company, this is what you’re going to need

Thorough Feasibility and Viability Studies

As you can imagine, the construction industry has a lot of players due to the demand for construction companies. As a result, it is important for you to study the landscape in your local environment before starting your construction company. Take into account indices like population, demand, the new for new buildings, the level of saturation within the industry and the necessary trade unions or bodies that you need to join to be accepted as a part of the construction community. These studies are important because you need to know what you’re getting into and how best to start your journey.

A Strong Business Plan

Starting a construction company requires money, personnel and equipment and you might not have all of these things at the onset. However, a strong business plan is the first step in creating an organizational template that contains the structure, staff size, cost implications and plans that will show the direction in which your company is going.

License, Bonds and Insurance

You will need to obtain the statutory licenses required to operate legally within the provisions of the law as a business entity in the construction industry. In addition to this, you need to get the necessary insurance to protect business assets and personal liabilities as well as get insured against work-related damages or injuries.  Construction bonds are also necessary especially if you want to take on big projects.


Quite frankly, this is one of the most important things you need to start your construction company. You need to get tools, equipment, rent or lease buildings, pay bills and probably do some advertising. If you haven’t got a stack of money you’re banking on, it is ideal to start sourcing for funds and applying for finance early on.

Build a Network with Other Industry Participants

You will need to have a good relationship with other contractors, suppliers and other players in the industry to give you a good chance of getting jobs and effectively completing them. Other contractors can refer you for projects and suppliers will help you finish jobs before deadlines whenever they can.

So if you’re thinking about starting a construction company, this is what you’re going to need.