Four Easy Steps to Acquire Your Contractor License Bond
By Eric Halsey
Answering questions like “What is a contractor license bond?” and “How can I acquire one?” are easier than you think. With this quick guide, we’ll walk you through the basic steps of getting your bond and provide links to resources detailing your state’s individual requirements so you can get started today.
First Things, First: Who Needs to Get Licensed and Bonded?
The construction contracting industry includes basically any business or individual who constructs or alters, or offers to construct or alter, any building, highway, road, parking facility, railroad, excavation or other structure in a particular state. Any work being done directly for the federal government is generally excluded from state requirements and subject to unique federal regulations.
Anyone wishing to act as a construction contractor will need to get all their relevant licenses. These licenses require that you obtain surety bonds to ensure you follow all the relevant rules and regulations which come along with your license. Importantly, there are some exceptions to licensing requirements. The specific California exceptions are listed here, but you should check your state’s laws on the subject. Once you’ve determined your need for a particular license, what’s the first step?
Step 1: Understand All the Licenses You’ll Need
This is important — in order to operate, you may need to obtain a license and/or a surety bond in the relevant state, municipality, and locality in which you’re operating. There’s obviously a tremendous amount of variation here, so some research is definitely required.
The following contractor’s license bond guide has lots of helpful information on the state requirements to get you started. You can also talk directly with your bond provider to see if they have further resources on municipal and local requirements.
Step 2: Find the Right Bonding Agency
Once you’re certain you meet all the requirements, you need to find the best bonding agency for your needs. First, you’re going to want to find a provider with ample experience in providing bonds to your specific type of work. That will ensure they’ll have the expertise to help you understand all those licensing requirements we just mentioned.
Beyond that, it’s important to find an agency which underwrites a large number of bonds and is a Managing General Underwriter (MGU). Underwriting many bonds means they can negotiate better prices for you. Being an MGU means they not only underwrite your bond, but also get involved in the claims process, so it’s in their interest to ensure you’re informed on how to avoid them.
Think of your bonding agency like a partner — you’re not going to buy a bond one single time, since they need to be renewed every one or two years — so it’s best to choose wisely.
Step 3: Get Approval for Your Bond(s)
The approval process should be simple as long as you meet all the licensing requirements and have a personal credit score above 650. Most bonding agencies will allow you to do this online.
Step 4: Sign Your Bond(s) and Submit Them to the Relevant Authorities
The final step here is to sign any bonds you may be submitting before you make a copy for your own records and mail the originals off. The copy is important in case anything happens and you need to prove you’re bonded without having to go to the relevant government authority.
Keep in mind that you may have to submit other documents alongside your bond, so double check the requirements before you mail everything off. After all this is complete, the state should send you your contractor license. Depending on your state, municipality, and locality, this may take between one and three weeks.
Other Things to Consider
Bear in mind, the entire licensing process often takes several months to complete. This guide only describes the part relevant to getting bonded. Be sure to plan everything in advance, so you’re not caught unprepared for any delays.
Eric Halsey is a historian by training and disposition who’s been interested in U.S. small businesses since working at the House Committee on Small Business in 2006. Coming from a family with a history of working on industry policy, he has a particular interest in the Surety Bonding industry with a focus on Construction and loves sharing his knowledge for JW Surety Bonds.