Minnesota Contractors License Bonds

Get Your Minnesota Contractor Bond

Who Is Required To Purchase a Minnesota Contractor Bond

The Contractor Recovery Fund

Minnesota has a Contractor Recovery Fund. This is a special account used in the event a contractor is found guilty of any fraudulent action that financially harms their customers. We'll look at examples below.

If a contractor is found guilty of any fraudulent misconduct, the fund will pay up to $75,000 per claim.

The contractor's license is immediately suspended until the money paid out by the claim is paid back 2X over plus interest.

If you decide to pay into the fund (a max of $50,000) you do not have to purchase a surety bond for any of the license classifications.

The Minnesota Contractor Bonding Requirements

Choosing to purchase a surety bond has the potential save you hundreds of dollars rather than contributing to the Recovery Fund.

Here are the license classifications that have a bonding option and the bond amount:

As you can see the bond amounts vary based on license classification. The prices vary too and those are listed above and below.

County or Municipal Bonding Requirements

Depending on where your project is located you may have to purchase a separate county or city contractor license or permit bond.

A license bond is required before a contractor license is issued and work is allowed to being in the county or city.

A permit bond is required for a specific job and is only active for the length of that job.

Right of way bonds are very common for projects commissioned by a city government agency or when a private project will temporarily damage public (city) property. Right of way bonds are permit bonds.

You'll be notified of these additional bonding requirements when you apply for the necessary permits to begin work on the project.

When you apply for the necessary permits for a specific project, you'll be notified of all bonding and licensing requirements for the county or municipality.

Examples of cities we have helped contractors satisfy the bond requirement include:

As you can see, at the local level, the bonding requirements can vary. But each bond is required and serves a similar purpose.

Why is a Minnesota Contractor Bond Required?

Minnesota and local government agencies require contractors to obtain licenses to show:

• The required experience levels
• Education requirements are met
• The Proper business records are recorded
• The correct license type is obtained for the work being completed

This licensing process is a set of standards contractors are required to meet before they can legally perform work in the state.

And the Recovery Fund and a surety bond is the primary way the Minnesota Department of Labor and Industry - plus local agencies - hold contractors accountable for the promises they are make to their customers.

Bottom line the fund and bonds help ensure the contractor fulfills contracts and performs quality work.

What Does a Minnesota Contractor License Bond Protect Against?

Similar to the Recovery Fund, all contractor bonds serve the same purpose of ensuring the contractor completes contracts and does not financially harm their customers to increase profits.

Despite the licensing process, there will always be a handful of contractors who cut corners to increase profits.

These fraudulent actions of misconduct can include:

• Breaking the terms of a construction project
• Taking deposits or down payments and never starting or completing a project
• Replacing agreed upon materials with cheaper alternatives to increase profits
• Failing to pay subcontractors for completed work
• Neglecting building codes and purposefully performing poor quality work

If a contractor is found guilty of any of these actions, a claim can be made against the contractor license bond or permit bond for financial compensation, but only up to the bond amount.

The bond amount direction impacts the price to purchase the bond.

How Much Does a Minnesota Contractor Bond Cost?

At a high level the price of a contractor bond is based on a rate quoted from a surety.

A surety is an insurance company that underwrites the surety bond. Sureties use the following factors to perform an independent analysis of the applicant:

• Personal credit of the owner or owners
• Contracting experience and industry experience
• Any prior bond claims if you or an owner has been licensed in the past

BOX: The rate multiplied by the bond amount is the price you pay.

This is why using a specialized surety agency like Surety Bonds Direct can help you save hundreds of dollars.

And in the case of all Minnesota contractor bonds, we have already secured low fixed prices for the bond you need:

• No credit check
• No background check
• No worry of past bond claims

Here are the bond prices for each license classification. You can see purchasing a surety bond can be far less expensive compared to paying into the Recovery Fund.

TABLE

Bond Pricing For County and City Contractor Bonds

For most county and city level contractor bonds, we have secured low fixed prices. This means you can:

• Skip having your credit pulled
• Speed up the bond purchase process

The prices are typically calculated as 1.0% to 1.8% of the bond amount you require.

Click here and find out how much your local county or municipal bond will cost.

What Happens After You Purchase Your Bond?

Purchasing your bond is as easy as completing an online order form. Once your order is complete our issuance team will prepare your bond with:

• The correct surety bond form
• The required signatures
• Any required power of attorney

Most Minnesota contractor bonds can be emailed to you speeding up the process.

If the agency requiring the bond wants the original bond, we can mail you the original bond. Make sure you account for shipping time.

Determining The Contractor Bond Term

Most Minnesota contractor bonds have a bond term or 2 years. Depending on the bond, you may be able to choose a 1 year bond term. Make sure you ask your bond specialist.

County and city bonds typically have a bond expiration date of December 31st, every year. This is not always the case though.

Permit bonds (and right of way bonds) are purchased for the life of the project. Most permit bonds have a term or 12 months so if the project were to extend past this time period, you would have to renew the bond.

Renewing Your Contractor Bond

Your Surety Bonds Direct bond specialist will reach out to you 30 to 40 days in advance of your renewal date to make paying the renewal premium easy.

Once you pay the renewal premium your bond is activated for the next term.

If you no longer need your bond, don't renew it and it will expire automatically.

Contractor Bonds And Getting Your Minnesota Business License/Registration

Applying for a state or local license typically follows the following steps:

1. Pass any required examinations
2. Outline business management
3. Decide on license classification and specialty or registered agent
4. Purchase the required surety bond or pay into the Recovery Fund
5. Pay all the appropriate fees
6. Submit your completed application

Here are some local resources to help you find the information you need to get licensed or permitted:

• City of Minneapolis
• City of Baxter
• City of Lino Lakes
• City of Austin
• City of Maple Grove
• City of Saint Cloud
• City of Brainerd