Surety Bond Encyclopedia

Contractor Bond in Lieu of Financials - MAIL Bond - Statewide in Arkansas

Brief Summary

Two things to settle before you buy anything. This bond is not one number. It runs from $50,000 for a Specialty classification up to $500,000 for Building, Heavy, Highway and Municipal work, because the statute sets it at ten times the net worth your classification requires. And it does not replace the separate $10,000 Contractors Surety Bond, which the Board requires from you either way. Get your classification right first, then quote it.

Arkansas contractors applying to the Contractors Licensing Board must show financial capacity, normally through a CPA prepared financial statement. Ark. Code Ann. 17-25-304 lets an applicant file a surety bond instead, in an amount equal to ten times the required net worth for that license or registration classification. On the Board's current form that works out to $50,000 for Specialty, $200,000 for Light Building, Mechanical and Electrical, and $500,000 for Heavy, Highway Railroad Airport, Municipal and Utility, and Building. The State of Arkansas is the obligee and has priority over all other claims against the bond.

We can help with all Arkansas bonds!

How to Apply for a Contractor Bond in Lieu of Financials - MAIL Bond:

Settle your license classification first, because it sets the bond amount. Specialty is $50,000, Light Building, Mechanical and Electrical are $200,000, and Heavy, Highway Railroad Airport, Municipal and Utility, and Building are $500,000.
Decide whether you actually want the bond. The alternative is a CPA prepared financial statement, compiled or reviewed depending on your license type and project size.
Legal business name exactly as it appears on the Contractors Licensing Board application.
Owner or principal information and authorization for a credit review.
Business financial information. At $200,000 and especially $500,000 this is real underwriting, not a formality.
Confirm the surety is both authorized in Arkansas and on the United States Department of the Treasury's List of Approved Sureties.
Complete the bond application, review the quoted premium, and pay it.
Execute the Board's current Bond in Lieu of Financial Statement form rather than a generic bond form.
File it with the license application along with the $100 filing fee, which the Board takes by check or money order only and treats as nonrefundable and nontransferable.
Buy the separate $10,000 Contractors Surety Bond as well. This bond does not replace it.

Detailed Information About the Arkansas Contractor Bond in Lieu of Financials - MAIL Bond:

The amount depends entirely on your classification

This is the fact the page you are probably comparing against does not give you, and the spread is tenfold.

Ark. Code Ann. 17-25-304 does not name a dollar figure. It sets the bond at ten times the required net worth for the applicant's license or registration classification, so the number moves with what you are licensed to do. The Board's own Bond in Lieu of Financial Statement form lists the resulting amounts:

Heavy, $500,000. Highway, Railroad and Airport, $500,000. Municipal and Utility, $500,000. Building, $500,000. Light Building, $200,000. Mechanical, $200,000. Electrical, $200,000. Specialty, $50,000.

Work backwards through the ten times multiplier and you can see what net worth the Board expects from each group. A Specialty contractor is being measured against $5,000, Light Building, Mechanical and Electrical against $20,000, and the four heavy classifications against $50,000.

If you apply in more than one classification, settle with the Board which figure governs before you buy. Quoting the wrong tier is the most expensive mistake available here.

You are not required to post this at all

The bond is an alternative, not an obligation. The default route is a financial statement prepared by a licensed CPA or licensed public accountant.

Under 17-25-304 that means a reviewed financial statement for work of $750,000 or more, and a compiled financial statement for work under $750,000, both prepared in accordance with the AICPA Statements on Standards for Accounting and Review Services. The Board's commercial application puts the same split in licensing terms: a compiled report from a CPA who is not an in-house CPA, dated within one year, for a Restricted Commercial license, and a reviewed or audited statement for an Unrestricted Commercial license.

Contractors choose the bond for two reasons. Either they do not want to hand the state a full financial statement, or their balance sheet does not carry the required net worth. Worth knowing if you go the statement route instead: the application states that one half of the net worth requirement for the classifications requested must be cash in the bank.

It does not replace the $10,000 bond

This is the single most common and most expensive misunderstanding about Arkansas contractor bonding, and the Board says it in plain words on the application: this bond does not replace the $10,000 Contractors Surety Bond that is required.

They are two different instruments doing two different jobs. The $10,000 bond under Ark. Code Ann. 17-25-401 is the standard commercial contractor licensing bond that every commercial contractor and subcontractor files. The bond on this page substitutes for a financial statement. A contractor who buys only one of them has an incomplete file.

Budget for both.

Your surety has to be on the Treasury list

Ordinary state licensing usually just requires a surety admitted in the state. Arkansas asks for more. Under 17-25-304 the bond has to come from a surety authorized to transact surety business in Arkansas and listed on the United States Department of the Treasury's List of Approved Sureties.

That second condition rules out some carriers that would otherwise be perfectly acceptable, and it is worth confirming before you pay a premium rather than after the Board returns your filing.

Terms that matter once it is in force

The form is continuous. It has to be maintained in effect throughout the period the contractor is licensed, rather than expiring on its own each year.

A surety can only cancel on at least sixty days notice to both the Board and the principal, and that notice does not relieve the surety of liability for claims that have already accrued.

The statute also puts the State of Arkansas ahead of everyone else. The State is the obligee and has priority over all other claims to recover against the bond, so private claimants come after the State rather than alongside it.

Eligibility and Requirements for a Arkansas Contractor Bond in Lieu of Financials - MAIL Bond:

A surety authorized to transact surety business in Arkansas AND listed on the United States Department of the Treasury's List of Approved Sureties.
Bond amount equal to ten times the required net worth for the classification, per Ark. Code Ann. 17-25-304.
The State of Arkansas as obligee, with priority over all other claims to recover against the bond.
The Contractors Licensing Board's own Bond in Lieu of Financial Statement form.
Continuous form, maintained in effect for as long as the contractor is licensed.
Cancellation only on at least sixty days notice to both the Board and the principal, with no relief from liability for claims already accrued.
Business name on the bond matching the Board application exactly.
A separate $10,000 Contractors Surety Bond under Ark. Code Ann. 17-25-401, which this bond does not satisfy.

Arkansas Contractor Bond in Lieu of Financials - MAIL Bond FAQs:

How much is this bond?

It depends on your classification, and the range is wide. Specialty is $50,000. Light Building, Mechanical and Electrical are $200,000. Heavy, Highway Railroad Airport, Municipal and Utility, and Building are $500,000. The statute sets it at ten times the required net worth for your classification rather than naming a flat figure, and those are the amounts printed on the Board's own form.

Do I have to post this bond?

No. It is an alternative to filing a financial statement prepared by a licensed CPA or licensed public accountant. If you are willing and able to submit the statement, you do not need this bond. Contractors choose it when they would rather not disclose full financials, or when their net worth does not reach the level their classification requires.

Does this replace the $10,000 contractor bond?

No, and the Board says so directly on the commercial application: this bond does not replace the $10,000 Contractors Surety Bond that is required. That one comes from Ark. Code Ann. 17-25-401 and applies to commercial contractors and subcontractors generally. This one substitutes for a financial statement. You need both, and they are quoted separately.

What financial statement would I be avoiding?

Under 17-25-304, a reviewed financial statement for work of $750,000 or more and a compiled financial statement for work under $750,000, both prepared by a licensed CPA or licensed public accountant under the AICPA Statements on Standards for Accounting and Review Services. The Board application frames it as a compiled report from a CPA who is not in-house, dated within one year, for a Restricted Commercial license, or a reviewed or audited statement for an Unrestricted Commercial license.

Can any surety company write it?

No. Arkansas requires the surety to be authorized to transact surety business in the state and to appear on the United States Department of the Treasury's List of Approved Sureties. That is a narrower pool than most states require, so confirm it before paying a premium.

What does it cost?

You pay an annual premium rather than the face amount, and the face amount is what drives it. A $50,000 Specialty bond and a $500,000 Building bond are very different underwriting exercises. Business financials and ownership credit set the rate, and at the upper tiers expect a real financial review. Since applicants often come to this bond precisely because their balance sheet is thin, there is no honest single rate to publish. Get a quote against your actual classification.

Does the bond expire every year?

The Board's form is continuous and has to be maintained in effect throughout the period you are licensed, rather than lapsing on an annual date. A surety may cancel only on at least sixty days notice to both the Board and you, and that notice does not release the surety from claims that have already accrued.

Who gets paid first if there is a claim?

The State. Ark. Code Ann. 17-25-304 names the State of Arkansas as obligee and gives the State priority over all other claims to recover against the bond. Private claimants come behind the State rather than sharing equally with it.

I build houses. Is this my bond?

Probably not this exact form. The Board runs a Commercial arm and a separate Residential Committee, created in 1999, that licenses builders of new homes. The Bond in Lieu of Financial Statement form referenced here is the commercial one. If you are applying on the residential side, confirm with the Board which form and which amount apply to you before buying.

What else do I file with it?

The license application carries a $100 filing fee that the Board accepts by check or money order only and treats as nonrefundable and nontransferable. Note also that the application says the expiration date of the license is determined by the date of the financial statement submitted, so if you are filing a bond instead of a statement, ask the Board how your expiration will be set rather than assuming.