What is a Los Angeles Surety Bond?
Surety bonds are required for certain professionals in California and LA, such as motor vehicle dealers, freight brokers, bar owners, and more. Additionally, certain types of bonds may also be needed for court proceedings.
What is a surety bond? In short, these bonds are used to guarantee financial reimbursement to the affected party (usually a government entity or the general public) if you breach contractual obligations. They are required across Los Angeles for Fortune 500 companies and small businesses alike.
Read on to find out if you need a surety bond in Los Angeles.
Requirements to Get Bonded in Los Angeles
A surety company will often require financial statements and a credit report when assessing your eligibility for a bond. They want to know that you can pay bond claims if they happen and that you can handle the responsibilities tied to a bond.
While there are many types of California surety bonds, the process to get bonded is generally the same across the board.
- Fill out a quick bond application and get a free quote.
- Sign the indemnity agreement and send it back to your bond provider.
- Pay the invoice online.
Once everything is processed, you will receive a copy of the surety bond in an email. Additionally, the original bond will be sent to you in the mail.
Find Your Surety Bond
The obligee (the one requiring you to get the bond) should be able to provide a copy of the Los Angeles surety bond form you need. However, if you are still early in the application process and haven't been given any forms, understanding the three main categories of surety bonds is a good place to begin your search.
License and permit bonds - these types of bonds are needed for various professionals to operate legally. Auto dealer bonds, mortgage broker bonds, and freight broker bonds are some examples. The bond you need will be determined by the city and county you operate in.
Contractor bonds – businesses and individuals working on public construction projects are likely required to obtain a commercial bond, known as a contractor bond. These bonds may include bid bonds, supply bonds, performance bonds, and payment bonds.
Court bonds – California courts require these bonds for a variety of purposes. These include probate bonds or judicial bonds.
Most Popular Surety Bond Types
Los Angeles Alcoholic Beverage Tax Bond - The California Department of Revenue requires any business that holds a liquor license also to have this bond. Alcohol tax bonds guarantee that bondholders (business owners) will pay all the required sales tax and fees stated in local and state laws.
Los Angeles Mortgage Broker's Bond - Also known as a finance lender surety bond, it is required to get a license in LA to lend money/broker loans. It ensures a mortgage broker adheres to applicable laws and protects the government and general public from financial loss due to the broker's poor financial decisions or unethical choices.
Los Angeles Medicare Bond (DMEPOS) - This bond is required by the Center for Medicare and Medicaid Services (CMS) for anyone that supplies medical equipment, prosthetics, orthotics, and other medical supplies. It aims to reduce Medicare/Medicaid fraud and abuse.
Los Angeles Cannabis License Bond - Also called a marijuana license bond. The Bureau of Cannabis Control requires an individual to have this bond before getting their license to run a cannabis business or conduct any cannabis business services. Depending on your business structure, there is an adult recreational surety bond and a medical bond.
Los Angeles Insurance Broker Bond - This bond is required to become an insurance broker. Once obtained with licensure, the bondholder is free to conduct insurance services. They may work as an insurance agent at an insurance company or insurance agency within the bond's specified region.
Los Angeles Subdivision Bond – When the government requires upgrades and changes to land, the landowner must obtain this bond (also called an improvement bond, paving bond, or plat bond). It's a financial guarantee that the landowner will complete improvements or enter partnerships with subcontractors who can complete the work.
Los Angeles Lost Title Bond – For those who lose the title to their cars. Whether or not this bond is needed is determined on a case-by-case basis by the DMV.
Additionally, three other bonds are prevalent in LA (auto dealer bonds, freight broker bonds, and contractor's license bonds).
Getting an Auto Dealer Bond
Anyone that sells more than five cars a year in California legally needs to obtain an auto dealer license. In order to do so, there is a bond requirement in place in the form of an auto dealer bond. This bond ensures an auto dealer will adhere to all state and local laws pertaining to selling vehicles.
- Bond amount: $50,000 for retail dealers and $10,000 for motorcycle dealers, motorcycle retailers, all-terrain vehicle dealers, or wholesale-only dealer
Getting a Freight Broker Bond
Getting a freight broker license in LA requires the applicant to have a freight broker bond (also known as a BMC-84 bond). This requirement is put in place by the Federal Motor Carrier Association (FMCSA) to protect shippers and motor carriers.
- Bond Amount: $75,000
Getting a Contractor License Bond
A contractor license bond is required for contractors to renew, reactivate, or get a new contractor's license from the Contractors State License Board (CSLB). This bonding requirement protects consumers and employees from faulty work or dishonest conduct.
- Bond amount: $15,000.
How Much Does a Los Angeles Surety Bond Cost?
Los Angeles surety bonds cost approximately 1-10% of the full bond amount that's required of you. For example, if you need a $20,000 bond, your cost could be anywhere between $200 - $2,000.
Bond cost varies drastically depending on the bond amount required of you and your rate. Your rate is determined by an underwriting process. An underwriter will look at your financial statements, credit scores, and past bonds to determine your financial strength.
Additionally, the surety bond provider that you choose can also affect your rate. While some insurance companies have surety bond departments, a surety bond company can help you secure lower rates faster. Our company is able to provide the lowest rates due to the large volume of bonds we write. Learn more about how to choose the proper bond company.
Can You Get Bonded with Bad Credit?
Yes, you can generally get bonded with bad credit. These are commonly called 'bad credit surety bonds', although they are the same bonds you get with good credit. The difference is that your rate will generally be higher—anywhere from 5% to 15%.
If you have bad credit, your ability to get a bond will depend on the type of bond you need and how bad your credit issues are.
License and Permit Bonds: Most of these types of bonds are obtainable with bad credit.
Court Bonds: It's possible to get approved for court bonds with credit problems, but it will depend on how severe the issues are. This includes fiduciary bonds, also known as probate bonds.
Contract Bonds: These are much harder to get with credit issues. Note that while you may be able to get contract bonds with minor credit problems, you'll probably be limited to smaller projects. Unfortunately, it's almost impossible to get approved for contract bonds with severe credit issues like large collections or civil judgments (unless you're a larger contractor with strong CPA business financials).
Performance Bonds: Often require a special program, such as the Bond Guarantee SBA program.
Frequently Asked Questions
Apply, get approved online, submit the indemnity agreement, and pay for the bond online. Then we will ship the original bond to you using your preferred method of shipping.
You need to contact the surety company's claims department and present proof that the claim is false.