Contractor License Guide
Table of Contents
- First Things First
- Who Needs a Contractor License?
- Getting Licensed
- Getting Bonded
- What It Means To Be Bonded
- Other Bonds You Might Need
- Frequently Asked Questions
First Things First
How to use this guide
We, Surety Solutions, put together this informational guide to explain the various steps you will need to complete to get a contractor license. There is also a substantial amount of information about the Contractor License Bond you will need to get since we are a surety bond agency who can issue that bond for you.
If this guide does not provide the information you need, we are here to help. You can reach us by phone at 866-722-9239, by email, or by live chat during our office hours. We look forward to helping you with your contractor licensing/bonding needs.
Who Needs a Contractor License?
Who needs to get a contractor license?
Every state will differ on what actions can be performed with or without a Contractor’s License, but generally, if you do, or offer to do, any of the following then you need a license:
- Construct, remodel, alter, or repair
- Develop residential property
- Flip homes
- Move, wreck, or demolish
Check your individual state’s statues regarding what actions require a Contractor’s License.
Types of Contractor Licenses
There are various types of Contractor Licenses including:
- Residential Contractor Licenses
- Commercial Contractor Licenses
- Electrical Contractor Licenses
- Plumbing Contractor Licenses
- Specialty Contractor Licenses
- and more
Some licenses restrict the contractor to performing just one trade, while other licenses encompass multiple trades.
Getting Licensed
How to get licensed
Every state will have their own specific guidelines on how to get licensed. You can check your state’s licensing board website, or you can check out our step-by-step tutorials here.
Essentially, the licensing process will consist of:
- Completing a contractor license application
- Paying licensing fees
- Getting bonded by purchasing a surety bond
- Getting insured by purchasing insurance
- And meeting other requirements such as a background check or educational exam
Getting Licensed with a Felony
If you have a record, you will likely be required to complete a Criminal Disclosure Statement in your license application. The Criminal Disclosure Statement will require you to list information such as the arresting agency, the date of the conviction, the sentence, and an explanation of what happened.
Felony charges are evaluated carefully, case by case and state by state. Getting approved for a license largely depends on the type of conviction and how long ago the conviction took place.
Some states may issue you a Probationary License with a conviction.
The best way to find out if you can get a license is to call your state’s licensing board and ask, or simply apply for a license and see.
You can learn more about what to expect when getting licensed with a felony.
Getting Bonded
We, Surety Solutions, can’t speak to the entire licensing process because we are not a licensing entity. What we can speak to is the surety bonding process, so that is what the rest of the guide will focus on.
Who needs to get a Contractor License Bond?
Almost every contractor will need to secure a Contractor License Bond before they can receive their license.
Your bond requirement will vary depending on the state you wish to get licensed in.
Where do I get a Contractor License Bond?
To get a contractor bond, you’ll likely have to work with a surety bond company or an insurance company.
We recommend getting a surety bond through a surety bonding company because they specialize in issuing these bonds and can help you find the best rate possible.
What am I evaluated on to get approved for the bond?
To get approved for a court bond, you will have to be evaluated, or underwritten.
The surety company will require you to complete an application so they can evaluate your ability to be bonded.
One factor that you will likely be evaluated on is your credit score. You can watch our video or learn more here.
How much does the bond cost?
Your bond amount is usually set by the state. Bond amounts can range widely.
You do not need to pay the full bond amount to get bonded. You will pay a portion of the bond amount, called the bond premium.
Things to note about the bond premium:
- Those with good credit can expect to pay 1-3% of the total bond amount.
- Those with bad credit can expect to pay 4-15% of the total bond amount.
- The rate you pay is an annual rate, not a monthly rate.
For example, if you need a $25,000 Contractor Bond, you don’t need to pay $25,000. If you have good credit, you might only need to pay $250 for your bond. This means you would need to pay $250 to get your bond. If your bond needs to be renewed the next year, you would need to pay to renew your bond.
If you want to know more about costs, check out one of our more focussed posts:
- How Much Does a Washington Contractor License Cost?
- How Much Does a Washington Contractor License Cost With Bad Credit?
- How Much Does An Oregon Contractor License Cost?
Get a free surety bond quote
If you want to know exactly what you’d pay, you can get a free quote here.
If you are worried about paying for your bond, or if you have bad credit, it’s okay. Our best advice is to apply for your Contractor Bond anyway. It is 100% free and it starts a conversation with a surety company.
What It Means To Be Bonded
How does the Contractor License Bond work?
When you get a Contractor License Bond, you are promising that you will follow all rules and regulations of your industry.
The bond is a protection for your clients and customers.For example, if you perform shoddy work or skip town before a job is through, your customer doesn’t need to settle for shoddy work or a half-finished job. They can make a claim on your Contractor License Bond.
What happens if a claim is filed against your bond:
A claim is a compliant saying that you have not fulfilled your duties. The important thing to remember about a surety bond claim is that claims are not instantly taken to be valid.
If a claim is filed against your bond, the surety company expects you to take care of the claim. If you fail to do this, the Surety will usually start an investigation to determine the claim’s validity. They will reach out to both you and the claimant.
One of two things will happen:
- The surety company will investigate the claim and determine it to be invalid. No further action will be taken with the investigation, but you might be liable for any costs the Surety incurred during the investigation process.
- The surety company will investigate the claim and determine it to be valid.
If the surety company finds the claim to be valid, they will remind you of your obligations under the bond and ask you to settle the claim. Usually this involves compensating the claimant for any financial loss or damages incurred.
If you fulfill the claim, the claim process ends.
If you fail to fulfill the claim, the surety company will step in and pay the claim for you. The surety company will then come to you for reimbursement of the settlement and any legal costs associated with it.
This is one way a surety bond differs from an insurance policy. While an insurance company does not expect to be paid back for a claim, a surety company does. You are responsible for cooperating with the surety company during the entire claim process. You are also responsible for paying back the surety company every penny they pay out on a claim, including all costs associated with the claim.
Learn more about the bond claim process and how to avoid it.
Other Bonds You Might Need
Contract Bonds
In addition to your Contractor License Bond, you might also be required to provide other surety bonds before beginning your work. Below are 6 common bonds you might be requested or required to get before you can start certain projects:
#1: Bid Bond
This type of bond guarantees that if you bid on a particular project and are awarded the contract, you will honor the terms of your bid and sign all contracts related to the project.
This prevents contractors from submitting a lowball bid and then changing the terms of the contract before work gets underway; or backing out of a contract after being awarded the bid.
#2: Performance Bond
A Performance Bond guarantees that you will adhere to all terms of the building contract and finish the job as promised.
A Performance Bond requires contractors to stay on-budget and meet the predetermined completion deadline.
Learn more about Performance Bonds.
#3: Payment Bond
A Payment Bond guarantees that you will pay all subcontractors and suppliers for their services and materials.
#4: Supply Bond
A Supply Bond guarantees that you will be able to provide all the needed materials to a contractor.
This type of bond may be relevant for contractors who also furnish building materials for projects on which they may not actually perform the work.
#5: Maintenance Bond
A Maintenance Bond guarantees that the workmanship you provide on a project is dependable enough to stand the test of time.
In other words, a Maintenance Bond protects the client against losses caused by shoddy labor practices during construction or materials defects for a predetermined length of time after the project is completed.
#6: Subdivision Bond
Also called an Improvement Bond, this is often required by a municipality or public agency before entering into a contract for a new development.
A Subdivision Bond basically requires the contractor to make certain improvements to the property or structure(s) over a certain period of time after the development is finished (at the contractor’s expense) in order to be awarded the initial contract.
If you are in need of any of the above bonds, reach out to a surety bond company like Surety Solutions and apply for a free quote now.
Frequently Asked Questions
Common questions
You might still have a lot of questions. We made a list of frequently asked questions with answers such as:
- How do I know what kind of license I need to apply for?
- How long will it take to get licensed?
- How much does it cost to get licensed?
- Do I need to get fingerprinted to get licensed?
- How do I renew my contractor license?
To view the answers, read our FAQ Guide.
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Anna
Very smooth process and very responsive to all of our questions. Would recommend to anyone looking for a surety bond. Glad we decided to go with them from the start.
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