A contractor bond or precisely a contact license bond is significant that involves three distinct parties in the contract project, namely the contractor, the company that hires the contractor and the agency that issues the bond. This is a brief guide on California Contractor Bonds. To learn more about purchasing a contractor bond visit www.contractorbond.org.

In California, a contractor bond has to be presented before CSLB (Contractors State License Board) of California. As per rules under state law, contractors have to buy a contract license worth $15,000 with Contractors State License Board (CSLB) as per requirement for maintaining the license active or post cash in place of a bond.

What is the objective of a Bond?

The objective of such obligation is to benefit consumers who have been found to have been at a loss because of contractor’s work, their employees who have outstanding wages unpaid.

California contractors licenses bonds are fully repaid.

This means that in case of a claim is paid out by surety for the contractor, and the contractor is liable and responsible for paying back the surety the amount that is claimed as specified in the bod indemnity agreement.

What is a BQI?

If the license is obtained by an RME (Responsible Managing Employee) or RMO (Responsible Managing Officer) for a corporation, a BQI (Bond of Qualifying Individual) is required.

Note that the BQI has to be obtained only when the RMO holds below 10% stake (voting stock of the corporation). In such a reality, you will have to complete a designated exemption form.

In case your corporation has more than one RMEs or RMOs, each has to obtain a BQI.

Cost of California Contractors License Bond

The premiums payable for California Contractors License Bond are mostly according to the credit and other rating factors such as the history of contractor licenses.

As of today, HCC surety offers a bond that will not be taken into consideration for the first year if the contractor can fulfill the designated set of criteria.

To get the license as new, the incoming incumbent must not have a roofer or pool classification. They must not be associated with another permit in the past.

Based on the new incumbent’s credit, if they have high confidence & license history the cost of license bond may be close to $100 for one year.

If the expecting contractor has a low credit history and other damaging reasons including complaints about a license, bankruptcy, liens on file or claiming bond before the reach of the time limit, the cost may be more than $1300 per year.

Contractors having multiple damaging factors may find it hard to get a license bond at any price.

In such case, is the contractor deprived doing business forever?

No. In such extreme case, a contract can pay $15,000 cash with the state government in place of the license bond.

The cost criteria could be taken as the set of eligibility criteria for getting a California Contractors License Bond.

Not sure?

Getting a California Contractors License Bond might be tricky unless you are a genius. To get clarity on the issue, contact reputed and experienced professional contracts layers in your locality.