Most states in this country require professionals to obtain a contractor’s license bond, and California is no exception. Although it is only one type of surety bond which is common to the construction industry, the contractor’s license bond has a great deal of importance, because it offers a certain level of protection to a project owner that the contractor in charge of a specific job, or who is in charge of managing some number of subcontractors, will complete any work agreed to in a professional manner. California contractors license bonds are not limited to the construction industry however and are generally required of all professional contractors providing services to consumers, as well as other businesses.


Contractor License Bond California

A California contractor bond is required by the state, just as it is by many other states, as a condition of conducting business within state borders. In essence, a California contractors license bond is an agreement between three parties: a principal (the contractor), an obligee (the person or company which requires the bond, which can either be a government agency or a company), and the surety (a financing company which sells the bond to the principal).

The purpose of the surety is to guarantee that a contractor will abide by all state regulations imposed by authorities, and it usually will also have some language that references a minimum level of training necessary to conduct business in a particular field. A contractor bond differs from other kinds of CA surety bonds which are generally issued for the construction industry. Whereas performance and payment bonds, and bid bonds, both relate to work on a specific project, contractor bonds are more closely related to compliance with regulations, and standards of workmanship within a particular field.

Why do you need to be bonded and insured?

It may sound like having to be bonded as a contractor is an expense that doesn’t add value to your business, and is something you could do without. However, in some states like Cali, having a California contractor bond is a condition of doing business there and you would not be allowed to provide professional services to clients without it.

This is considered necessary by state authorities so that consumers can be protected against unscrupulous persons who may not have the professional integrity to provide fair services for amounts paid to them. Without such guarantees in place, some contractors claiming to have professional skills in their field might in truth have no training whatsoever, and just take money from customers before skipping town.

Kinds of bonds:

Payment and performance bond is a specific type of bond which offers a contractual guarantee by a contractor to the manager or owner of a property, and it covers a specific project that the general contractor has agreed to complete. The purpose of the payment and performance bond is to assure the owner or project manager that the project will be completed as specified and that all suppliers and subcontractors involved in the project will be paid for their services and materials.

If any of the terms of this agreement are not met by the general contractor, the owner or project manager would then be within his rights to make a claim against the bond in the amount of any perceived damages. Payment and performance bonds are used widely in theconstruction industry because of the nature of the business, i.e. general contractors are responsible for subcontractors, and must meet the terms set down by an owner. A great many government organizations, from the federal government on down to city and town governmental agencies, also require payment and performance bonds as part of their guidelines for hiring contractors to do work for them.

Bid bond is a specific type of surety which a contractor takes out as a kind of guarantee for a project owner that he will complete the project on time and for the amount of money that he originally bid on the project. This contractual guarantee allows a project owner to have a certain level of confidence that a general contractor will be able to meet the terms specified for completion of a project which he has bid on.

Since most project owners or managers don’t have any way of knowing how stable a general contractor’s business is, nor how reliable the contractor is about completing projects, a bid bond provides the necessary business guarantee that the work will be finished on time, that work will be at a satisfactory level, and that it will be completed for the amount of money bid by the contractor.

Why bonding is important:

If there were no bonding in place anywhere, there would be no guarantees that work would be completed by contractors or business professionals on time, and there would be no guarantees that the work would be of an acceptable quality level. It would even be possible for a contractor to abandon the work entirely, after having been paid at least a partial sum of money. Counteracting all these potentially negative results is the contractual guarantee provided to an owner or project manager that all work will be completed as specified and in compliance with local rules and regulations.

If the terms specified in a bond are not lived up to as explicitly listed, the owner or manager would then have the option of claiming the bond to recover any damages suffered as a result of unfinished or unsatisfactory work. Because bonds keep this whole work model in balance, they are extremely important to a great many industries in this country.

How to Get a Contractor License Bond California:

All kinds of bonds are used in the construction industry can be obtained through NFP, one of the most respected and most experienced bond companies in the U.S. California contractor’s license bonds, bid bonds, payment and performance bonds, and all other types of sureties are available from NFPs Bonds Division, so contact us today with whatever bonding needs your company may have. NFP works with top companies to make sure you are properly bonded.