Surety Bond Encyclopedia

General Contractor License Bond - Statewide in Alabama

Brief Summary

In Alabama the size of jobs you can bid is set by your financial statements, and the license bond is a separate filing that has to match what the obligee asked for. Get the obligee's amount and form, and the bond can be quoted and issued to that exact wording so the license or permit file is not held up.

Alabama licenses general contractors through the Alabama Licensing Board for General Contractors under Title 34, Chapter 8 of the Code of Alabama. A license is needed when the cost of an undertaking, labor and materials included, is $100,000 or more, or $5,000 or more for swimming pool construction. A general contractor license bond guarantees that the contractor will follow the licensing law and the bond's terms, with valid claims paid up to the bond amount. Confirm the amount and form with the obligee before the bond is issued.

We can help with all Alabama bonds!

How to Apply for a General Contractor License Bond:

Get the obligee's bond form and required amount in writing.
Use the business name exactly as it appears on your Alabama license or application.
Complete the bond application and approve the quote.
Sign the bond as principal once the surety executes it.
Deliver the executed bond to the obligee by the method it specifies.
Track the license renewal date. Renewals sent more than 45 days early may be returned.

Detailed Information About the Alabama General Contractor License Bond:

The threshold most people have wrong

Under Ala. Code 34-8-1, a general contractor is anyone who undertakes to construct or superintend the construction, alteration, repair, demolition or similar work on a building, highway, sewer, structure, site work, grading, paving or other improvement in Alabama where the cost, including labor and materials, is $100,000 or more. Swimming pool construction is licensed at $5,000 or more.

How Alabama sizes your license

The Board grades prime contractors by bid limit. Ala. Admin. Code 230-X-1-.02 requires a net worth and working capital of at least $10,000, shown on recent financial statements, to qualify for the lowest bid classification. Above that, the maximum bid limit is ten times the lesser of net worth or working capital, except for unlimited licenses. An approved line of credit from a state or federally chartered bank or savings association is added to working capital, and a CPA prepared personal or parent company financial statement with a notarized guaranty can raise the bid limit one step.

The Board's prime application instructions require financial information no more than one year old, in an audited, reviewed or compiled statement prepared by a CPA or Licensed Public Accountant under generally accepted accounting principles. The Alabama Department of Transportation booklet is also accepted. Cash basis and tax basis statements, and statements showing a deficit, are not.

Where the bond fits

A general contractor license bond is a three party promise. The contractor is the principal, the surety backs the contractor, and the obligee is the agency or party that requested the bond. If the contractor breaks the law or the terms the bond guarantees, a person harmed can file a claim, and the surety pays valid claims up to the bond amount and then recovers from the contractor. Because the amount and wording come from the obligee, get its current bond form and amount in writing before the bond is issued.

Fees and renewal

The prime contractor application fee is $300 and the subcontractor fee is $150, paid by cashier's check or money order. Renewal is $200 for primes and $100 for subcontractors. Prime applications must be on file 30 days before a quarterly Board meeting, and every prime applicant takes the Business and Law exam administered by PSI. A license not renewed within a year of its expiration date requires a new application and the trade examinations again.

Eligibility and Requirements for a Alabama General Contractor License Bond:

Bond amount and wording as specified by the obligee.
Principal name matching the license record with the Alabama Licensing Board for General Contractors.
Current financial statements meeting the Board's $10,000 minimum net worth and working capital for the license itself.
Board application fee of $300 for a prime contractor or $150 for a subcontractor.
Passing the Business and Law exam administered by PSI for prime applicants.

Alabama General Contractor License Bond FAQs:

At what job size do I need an Alabama general contractor license?

When the cost of the undertaking, labor and materials included, is $100,000 or more under Ala. Code 34-8-1. Swimming pool construction is licensed at $5,000 or more.

How is my bid limit set?

Under Ala. Admin. Code 230-X-1-.02 the maximum bid limit is ten times the lesser of your net worth or working capital, after meeting the $10,000 minimum for both. An approved bank line of credit is added to working capital.

How much is the bond?

The obligee that requests the bond sets the amount and the form. Get both in writing before the bond is issued so it does not have to be redone.

What financial statements does the Board accept?

Audited, reviewed or compiled statements prepared by a CPA or Licensed Public Accountant under GAAP, no more than one year old, or the ALDOT booklet. Cash basis, tax basis and deficit statements are rejected.

Does Alabama have license reciprocity?

The Board lists reciprocity with Arkansas, Louisiana, Mississippi, North Carolina and Tennessee. Applicants must have held the same classification in that state for one year.