Are there any Financial Requirements for a Alabama Contractor License?
All applicants must have a minimum net worth or working capital (whichever amount is lower) of $10,000. The amount of net worth is essential to the surety company because the net worth essence represents the company's loss absorption capacity.
Minimum Net Worth/Working Capital
All applicants must have a net worth and working capital of at least $10,000, as shown by the applicant’s most recent financial statement (less than one-year-old) to qualify for the lowest bid limit classification. Except for licenses qualifying as “unlimited,” an applicant’s maximum bid limit shall be set by the formula of not more than ten times either the net worth or working capital, whichever is the lesser amount.
Lines of Credit to Increase Working Capital
Verification of a line of credit, from a state or federally chartered bank or savings association which has an office in Alabama, to the general contractor to increase working capital, must be submitted to the board in the format provided by the board. Lines of credit meeting board requirements will be added to the working capital shown in the contractor’s financial statement.
Personal Financial Statements to Increase Net Worth
Contractors meeting the minimum requirements of 230-X-1-.02(a)Requirments for Bid Limits may submit a personal financial statement to increase their net worth or working capital. Any personal financial statement or parent company financial statement submitted to raise the bid limit of a license shall not include the ownership value, which will not be considered. A personal financial statement with a completed guarantee agreement provided by the board may be used to increase the working capital or net worth of a contractor to increase a bid limit by one step. All personal financial statements must be signed by both husband and wife and notarized.
- Written by S. Alfonzo