If you are looking to get into the construction business in California, then you must have heard of the contractor’s license board. Under California law, any contractor taking on a project worth more than $500 needs a contractor bond. So, what is it all about?
Well, this is simply a bond that ensures that a contractor will get the work done, as per the contractual agreement. From a more technical perspective, it is an agreement between the State and a surety company that a contractor will abide by California license law. For context, let’s assume that a homeowner has contracted a construction company to complete their home. In the unfortunate event, the contractor is unable to finish the job, the homeowner can make a claim and get compensated from the contractor’s contractor license bond. From a contractor perspective, this bond can protect you from going belly up in case a claim is made.
So how does a contractor go about getting a contractor bond? Well, as discussed above, a contractor bond is an agreement between California and a surety company that a contractor will perform. This means that contractors can get their contractor license bond from a surety company. The cost of these bonds varies from one Surety Company to the next. For instance, https://www.contractorbond.org starts its bonds at $65 a year.
You are probably wondering, how can $65 a year cover you in case your contractor messes up? Well, that figure is just the premium that they pay annually, against a fixed predetermined figure, in case a claim is made. It’s the same way you make annual payments for your car insurance. Using the same logic of insurance, it the noteworthy that the amount a contractor pays in premiums varies depending on multiple factors.
One of the factors that determine how much a contractor pays annually for a bond is their creditworthiness. A contractor with negative credit ratings, is likely to pay higher than one that has consistently demonstrated stability in their finances. That’s because, the surety company wants to protect itself from the adverse effects of a claim, in case a high-risk contractor fails to deliver. It’s the same thing that car insurance companies do to protect themselves. When a driver has a history of recklessness, they are charged higher premiums for the company to cushion itself from massive losses in case of a negligent claim
Luckily, for most contractors, there are ways to get around bad credit. Top-rated surety companies like Contractorbond.org help out contractors that are suffering from financial distress. They understand that the real estate market is a tricky one, and that changes in market conditions can force even the most prudent of contractors into financial difficulty. Using the example of Contractorbond.org, this surety company has a program that offers competitively priced surety bonds to contractors that have bad credit. If you are a contractor with bad credit, this company could offer you a chance to redeem yourself, and get better rates in the future. It’s an amazing opportunity.
