Get An Instant Quote on Arkansas Surety Bond in Lieu of Financial Statement Now
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.
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.
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:
Therefore, contractors filing a bond in lieu of financial statement will need to provide bonds in the following amounts:
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.
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.
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.
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.
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.
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.
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.
The state of Arkansas also requires that a bond in lieu of financial statement meet the following requirements:
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