North Carolina Contractor License Financial Requirements

North Carolina sets your project-value limit by your financial position, which is the money half of the licensing overview. Limited needs working capital of $17,000 or a net worth of $80,000; Intermediate needs $75,000 working capital; Unlimited needs $150,000 working capital. Any tier may post a surety bond instead of demonstrating working capital. This is the requirement that decides most applications.

The three tiers

The figures in this table come from 21 NCAC 12A .0204 — working capital and the Limited net-worth alternative at .0204(b)(2), (c)(2) and (d)(2), and the bond amounts at .0204(e).

The three tiers

Limitation	Working capital	Net worth alternative	Surety bond instead
Limited	$17,000	$80,000	$175,000
Intermediate	$75,000	not available	$500,000
Unlimited	$150,000	not available	$1,000,000

The rule states each tier in words as well as figures. For Limited, 21 NCAC 12A .0204(b)(2) requires an applicant to “have current assets that exceed the total current liabilities by at least seventeen thousand dollars ($17,000) or have a total net worth of at least eighty thousand dollars ($80,000)”; the Intermediate and Unlimited subparagraphs use the same construction at $75,000 and $150,000 and offer no net-worth alternative. For the bond, .0204(e) requires the applicant to “maintain the bond in the amount of one hundred seventy-five thousand dollars ($175,000) for a limited license, five hundred thousand dollars ($500,000) for an intermediate license, and one million dollars ($1,000,000) for an unlimited license.”

“Working capital” here means current assets exceeding total current liabilities by the stated figure. It is not revenue, and it is not the value of your equipment unless that is a current asset.

You choose which tier to apply for. Nothing requires you to apply at the highest limitation your finances would support. Applying Limited and moving up later is a legitimate route where the capital or the bond premium for a higher tier is the obstacle — the cost is a second application and its fee, set out under Moving up later below.

Two things people misread:

• The net-worth alternative exists only at the Limited tier. For Intermediate and Unlimited it is working capital or a bond, and nothing else.
• The bond replaces the working capital; it is not stacked on top of it.

The report the Board will accept

For Intermediate and Unlimited, the figure must be reflected in either:

• an agreed-upon procedures report on a form provided by the Board, or
• an audited financial statement,

prepared by a certified public accountant, or an independent accountant engaged in the public practice of accountancy.

That wording is 21 NCAC 12A .0204(c)(2) and (d)(2)‘s own, and it is doing real work. A balance sheet your bookkeeper produced is neither of those documents. The rule names three ways to satisfy the requirement and no others: an agreed-upon procedures report on the Board’s form, an audited financial statement, or the surety bond below.

Start this early. It depends on somebody else’s calendar, and it is usually the critical path in the application.

If there has been a bankruptcy

Where the applicant, or any owner, principal or qualifier, is in bankruptcy or has been within the five years before the application, 21 NCAC 12A .0204(b)(4) requires a Limited applicant to additionally provide “an agreed-upon procedures report on a form provided by the Board or an audited financial statement with a classified balance sheet as part of the application.”

This does not apply to shareholders of a publicly traded applicant.

The surety bond route

In lieu of demonstrating working capital, you may obtain a surety bond. 21 NCAC 12A .0204(e) sets the requirements, and they are specific:

• Amounts: $175,000 Limited, $500,000 Intermediate, $1,000,000 Unlimited (21 NCAC 12A .0204(e)).
• The surety must be authorized to transact surety business in North Carolina and hold an A.M. Best rating of Superior (A++ or A+) or Excellent (A or A-).
• The bond is continuous and must be maintained for as long as you hold a license, or until you demonstrate the required working capital instead.
• Proof is filed with the application and with every annual renewal.
• The State of North Carolina is the obligee, and the bond benefits any person damaged by a breach of a construction contract, a breach of a contract for labor, materials or professional services, or an unlawful act or omission in performing a construction contract.
• If the surety cancels, both surety and licensee must notify the Board in writing within 30 days. Failing to provide written proof of compliance within 30 days of cancellation suspends the license until proof is provided.

The bond is in addition to, not instead of, any other bond required of you by law, regulation or a contract.

Bond or working capital?

A bond converts a one-off accounting exercise into a recurring premium, and it carries an ongoing compliance obligation with a suspension attached to it — 21 NCAC 12A .0204(e) requires written proof of the bond with the application and at every annual renewal. Demonstrating working capital costs the accountant’s engagement instead. Either way, renewal calls for evidence that financial responsibility has continued, so neither route is a one-time exercise.

Which is cheaper depends on your balance sheet, your credit and what your surety quotes. That is a conversation with your accountant and your broker; the figures above are what the Board requires, not a recommendation. What it costs sets out the surrounding fees.

Moving up later

Increasing your limitation is a separate application with its own fee and fresh financial evidence. 21 NCAC 12A .0304(a)(4) sets the fee at $100.00 for an increase to intermediate and $125.00 for an increase to unlimited, and it is a different application from a renewal rather than a field on one. A decrease is requested from the Board in writing; ask the Board for its current form of request, and do it before you start your renewal, because the two are handled separately.

Not the same as insurance

Financial responsibility and insurance are different things and the Board treats them differently. See insurance and bonds.

Where a bond is used instead of demonstrating working capital, the amounts and the conditions attached are at the surety bond route in detail.