What is an Arizona Contractor License Bond?
Like many other states, contractors working in the state of Arizona may be required to obtain a valid license to do business. Part of the licensing requirement is posting an Arizona contractor license bond to protect customers from illegal or fraudulent business practices. There is a statewide mandate for an Arizona contractor license bond, but the amount of the bond depends on the type of work a contractor performs and the value of the project.
As a type of surety bond, an Arizona contractor license bond is a three-party contract. The surety is the company providing the bond to the licensed contractor, while the contractor is known as the principal. The obligee is the authority requiring the bond to be posted, which is the Arizona Registrar of Contractors. When a customer is financially harmed in the process of dealing with a licensed contractor, a claim is paid by the surety company as compensation. However, contractors are required to repay claims over time.
What Does an Arizona Contractor License Bond Cost?
Both residential and commercial contractors working in Arizona must post a bond, but the amount of the bond varies. An Arizona contractor license bond can range from $2,500 to $100,000 dependent upon projected volume. Fortunately, the cost of an Arizona contractor license bond is only a small percentage of the bond requirement, ranging from 1 to 5%.
The percentage you pay for an Arizona contractor license bond depends on your financial strength, determined by your personal credit score and business financials. Low or poor credit may mean you have negative marks in your financial past, such as civil judgments, tax liens, or bankruptcy. These are signs that you may be a higher risk to the surety company providing your bond, and therefore, the percentage rate you pay is higher than it would be for a contractor with strong credit.
How Do You Get an Arizona Contractor License Bond?
Even if you have less than perfect credit, you can start the process of obtaining an Arizona contractor license bond by submitting a brief form online. After the surety reviews the application details, you are given a quote for your bond as well as the steps to follow to finish the process of securing the bond.