What is a Contractor License Bond?


A contractor license bond is a kind of surety bond. This type of contractor bond serves a purpose with three different parties that involved in a contractor project. Bonds are necessary to provide a guarantee that a general contractor will run their particular business in agreement with the norms and regulations covering to their specific contractor license. This license is not only helping you as a contractor but also helps others who have involved and got affected by the costly business deals.

The purpose of the bond:

The contractor license bond mainly protects three parties such as the contractor, the company or agency who has hired you for this purpose and the state bond issuing agency or service provider. By following this type of bond, you can ensure that you will provide the professional and ethical service. A California surety bond can also protect the public in a larger area. By following this bond, the contractor and the company will assure the people that the professional service from their end will do no harm and bad effect on them.

Requirements of the bond:

There are many requirements of Contractor License Bond. These are:

The surety company should write the contractor license bond through the helping hand of the California Department of Insurance. The amount of the bond should be $15,000.The bond should have consisted of the signature of attorney-in-fact for the surety company. This particular bond must be received at the headquarters of CSLB office. The time of the receiving period is 90 days from the effective date of the specific relationship. The contractor license bond should be written on a form that approved by the office of Attorney General.

Benefits of the bond:

This bond has many essential roles in construction works. There are many benefits of the contractor license bond.

The surety bond will improve the status of the contractor. The contractor has to complete the whole work within the given period. In the surety bonds, the contractor has the full liability to use their assets to grow the business. In the surety bond, the company can offer the technical and some financial assistance to the contractors. This will ensure the successful and speedy completion of the work. The contractors need to pay only for the using materials of bond limits. They do not need to pay for the whole facility. Surety bond meets the needs of all specific needs and requirements.

Many service providers in California can help you to get the License bond. You can vary their rates according to your preferences. They will provide you the quick and easy service. You do not need to take any pressure about that. The experienced specialist will guide you better in this case. You can run your business without any difficulties by following some simple steps. Homeowners also benefit when they choose to work with a bonded contractor as they are protected by the amount of the bond. The license bond will offer many advantages to the contractors, roofers, sub-contractors, electricians and other labors related to that particular project.

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

Contractor License Bond Requirements

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.