Picture this, you’ve finally followed that little dream that’s been circling in your head for years of starting your own business. Maybe it’s opening your own car dealership, contractor work, or making your side hustle like security or auctioneering a full time gig. This is a big deal! Before getting started just like any good citizen you’ve researched what you need to do in order to become legit—that’s when you come across a requirement for a license and permit bond—what is that!?
We know that operating your business can be complicated so let’s make the bonds as simple as possible.
What is a License and Permit Bond?
Oklahoma license and permit bonds are a type of surety bond, sometimes referred to as ‘commercial bonds’ or simply ‘license bonds’. Whatever you call them, these bonds are typically mandatory by government agencies as a pre-licensing obligation for a number of different businesses.
Before purchasing a bond of any type, it’s important to understand exactly what it is. A bond is a line of credit that will be required to be paid back. It is not insurance. Find out exactly what a surety bond is.
A license and permit bond promises that a business will function in agreement with federal, state, or local laws. Each license bond is specific to a specific industry, and guards customers and/or the state from things that may go array. Most commonly, license bonds protect governments and consumers from fraudulent practices committed by the business that is bonded. In any industry that requires bonding, each business must be licensed and bonded before they are allowed to legally operate.
How Much Does a License Bond Cost?
Each license bond offers protection up to a certain dollar amount, known as the total bond amount. That bond amount will vary depending on the industry, your business size, and the state which requires the bond.
Premiums–or what the person purchasing the bond must pay to get a license bond–also vary based on several factors. The most important factor is the applicant’s credit score. A premium is a certain percentage of the total bond amount required, calculated on a case-by-case basis. Typically a credit score of below 650 will result in a higher rate. If your credit score is above that then typically you get a better rate.
The cost for each bond varies on the type you are purchasing. A fence contractor bond in Oklahoma City typically costs about $100 while a sign contractor bond can cost anywhere from $100-$500 depending on the credit score.
Can You Get a License and Permit Bond with Bad Credit?
Sureties look at an applicant’s credit score as the most important piece of information to calculate their premiums. Personal credit score is so crucial that there are types of surety bonds–such as contract bonds–which are impossible to get with bad credit.
It’s good to know that this is not the case for most types of license and permit bonds. It does mean, however, that business owners with lower credit may end up paying a bit more. ECI has an excellent Bad Credit Surety Bonds Program, which can help you stay in business despite your credit issues.
If you have questions regarding your Oklahoma license and permit, surety bond, bid or performance bond call our office at (405) 373-2977.