Arkansas Surety Bond in Lieu of Financial Statement

Get An Instant Quote on Arkansas Surety Bond in Lieu of Financial Statement Now

instant surety bond quote button

Arkansas contractors may now post an Arkansas Surety Bond in Lieu of Financial Statement in order to get their license from the Arkansas Contractor License Board. Learn about what is required and how to easily obtain one of these bonds.

 

Background of the Law

 

In Arkansas, most contractors need to be licensed by the Arkansas Contractor Licensing Board (ACLB). Those who do not obtain a license may face a Class A Misdemeanor. Arkansas Code 17-25-304 originally required contractors applying for a contractor license to provide an Audited financial statement from a Certified Public Accountant (CPA). 

 

Fortunately, effective July 1, 2020, contractors can now provide a Surety Bond in Lieu of Financial Statement. Code 17-25-304(c) provides that: 

 

“(1) In lieu of providing a financial statement for a person or entity required to be licensed or registered by the board as required by subsections (a) and (b) of this section, an applicant may provide a surety bond.”

 

The new code also reduces the type of financial statements required for contractors wishing to provide a statement for licensing. Applicants may now submit a Reviewed financial statement instead of an Audited Statement. This is for an Unrestricted License.

 

Further, if the total cost of the work to be completed by the applicant, including without limitation labor and materials, is less than seven hundred fifty thousand dollars ($750,000) for a single project, the applicant may submit a Compiled financial statement for licensing. This is a Restricted License. 

 

These changes are important because they reduce the costs for many contractors. A surety bond in lieu of a financial statement, a Reviewed statement, or a Compiled statement are all significantly cheaper and less time consuming than an Audited financial statement. You can read more about different scopes of financial statements and what they entail here

 

What is the Amount of an Arkansas Surety Bond in Lieu of Financial Statement?

 

Arkansas requires contractors posting a Surety Bond in Lieu of Financial Statement to provide a surety bond ten (10) times the minimum net worth requirement for the classification held or applied for. The classifications for each type of contractor are below: 

 

  • Heavy Construction – $50,000 
  • Highway, Railroad, Airport – $50,000 
  • Municipal & Utility – $50,000 
  • Building – $50,000 
  • Light Building – $20,000 
  • Mechanical – $20,000 
  • Electrical – $20,000 
  • Specialty – $5,000 

 

Therefore, contractors filing a bond in lieu of financial statement will need to provide bonds in the following amounts:

 

  • Heavy Construction – $500,000 
  • Highway, Railroad, Airport – $500,000 
  • Municipal & Utility – $500,000 
  • Building – $500,000 
  • Light Building – $200,000 
  • Mechanical – $200,000 
  • Electrical – $200,000 
  • Specialty – $50,000 

 

This chart shows the amounts required by the state of Arkansas to post a surety bond in lieu of financial statement by contractor type. In the back a construction crane holds a small outline of the state of Arkansas.

 

What Does an Arkansas Surety Bond in Lieu of Financial Statement Guarantee?

 

The surety bond protects the public by ensuring that the Arkansas contractor will comply with Arkansas Code 17-25-101. It guarantees that the contractor will not engage in an act or omission constituting a breach of construction contract and will not commit any unlawful act or omission in performing construction. 

 

What Does an Arkansas Surety Bond in Lieu of Financial Statement Cost?

This shows the cost of an Arkansas Surety Bond in Lieu of a Financial Statement. The left shows a seal of Arkansas. The right is an outline of the state of Arkansas.

For most contractors, the cost of an Arkansas Surety Bond in Lieu of Financial Statement will cost about 2%. The cost can be higher or lower for contractors depending on their credit and financial strength. 

An Arkansas Surety Bond in Lieu of Financial Statement premium will renew each year that it is in place. 

 

How Do You Obtain an Arkansas Surety Bond in Lieu of Financial Statement?

 

Most contractors can obtain an Arkansas Surety Bond in Lieu of Financial Statement with a simple credit check. It can be done online here in minutes. Contractors looking for better rates can submit financial information such as company and personal financial statements to qualify for better rates.

 

Arkansas Surety Bond in Lieu of Financial Statement instant purchase button.

 

Duration and Cancelation of the Bond

 

An Arkansas Surety Bond in Lieu of Financial Statement must be continuous in nature. That means the contractor will need the bond to be in place as long as they maintain their Arkansas Contractor License. 

 

Cancelation

 

The bond can be canceled by the surety bond company writing the bond at any time by giving the contractor and the Arkansas Contractor License Board sixty (60) days written notice. Cancellation will not relieve the surety of any claims that took place during the bond’s term or the cancellation period. The contractor will need to replace the bond with another bond if this takes place.

 

The contractor may also have the bond canceled by submitting an acceptable financial statement to the Contractor Licensing Board. 

 

Parties to an Arkansas Surety Bond in Lieu of Financial Statement

This charts shows the three parties to an Arkansas Surety Bond in Lieu of Financial Statement. The background is an Arkansas forest and creek.

It is helpful to understand parties and names to the bond form. The Principal on the bond is the contractor who is applying for an Arkansas Contractor License. This is the party making the guarantee to be responsible for the bond’s obligation. The Obligee is the State of Arkansas. This is the party receiving the benefit of the bond’s protection on behalf of consumers. The Surety is the third-party bond company who is guaranteeing the contractor’s compliance of the bond’s obligations.

 

Other Bonds May Be Needed

 

The Bond in Lieu of Financial Statement is not a substitute for any other bond requirements including the Arkansas Contractor License Bond in the amount of $10,000. Arkansas contractors will still need this bond as well. Additionally, contractors may need other types of bonds such as performance bonds, payment bonds and bid bonds

 

Arkansas Surety Bond in Lieu of Financial Statement Requirements

 

The state of Arkansas also requires that a bond in lieu of financial statement meet the following requirements:

 

  • Be written by a surety bond company approved to do business in the state of Arkansas.
  • Be written by a surety bond company listed in the U.S. Treasury 570 Circular (T-Listed).
  • Be written by a licensed and registered resident or non-resident Arkansas agent. A copy of the agent’s license is required with the bond.
  • Have the contractor’s principal company name and EIN on the bond as registered with the IRS.
  • Be for the benefit of anyone affected by the contractor’s non-compliance with the bond’s requirements.
  • An original bond must be mailed to the Arkansas Contractor Licensing Board’s office. 

 

Contractors doing business in Arkansas that already have Reviewed financial statements that meet the state’s net worth requirements may want to save money by submitting these statements to the Licensing Board. Other contractors may choose to submit an Arkansas Surety Bond in Lieu of Financial Statement. These bonds are very easy to obtain for most contractors and can typically be purchased online in minutes.

 

Click here for the Arkansas Surety Bond in Lieu of Financial Statement Bond Form

 

 

Vice President at Axcess Surety
Vice President of Axcess Surety. Surety Bond and financial expert dedicated to helping contractors, businesses and individuals understand and obtain surety bond credit.
Josh Carson, AFSB
Latest posts by Josh Carson, AFSB (see all)
Featured Posts

All Rights Letters in Surety Bonding

Increased Limits of the SBA Surety Bond Guarantee Program

Parties to a Surety Bond

Surety Backed Letter of Credit

1 2 3 25
Contact Us

Axcess Surety is the premier provider of surety bonds nationally. We work individuals and businesses across the country to provide the best surety bond programs at the best price.

Headquarters:
5440 W 110th St Suite 300-2
Overland Park, KS 66211
12288 S. Mullen Rd.
Olathe, KS 66062
Copyright © 2024 Axcess-Surety.com ・All Rights Reserved Worldwide
magnifiercrossmenuarrow-down
Verified by MonsterInsights