Business FinancesQuestion 660 of 1605
Instead of filing a contractor's license bond, a licensee may deposit cash or equivalent securities with the State Treasurer under Bus. & Prof. Code §7071.12. To replace the $25,000 license bond entirely with cash, the licensee must deposit:
a.$5,000 cash (the statute allows a 5:1 leverage ratio against the bond face)
b.Cash, cashier's check, or eligible securities in the full $25,000 amount, held by the State Treasurer in lieu of the bond and subject to the same claim procedures
c.$10,000 cash and post a $15,000 surety bond as a combination
d.$25,000 in an interest-bearing escrow account at any FDIC-insured California bank
Explanation
Bus. & Prof. Code §7071.12 expressly allows a licensee to substitute cash, cashier's check, or specified securities in the FULL amount of the otherwise required bond ($25,000 for the contractor bond, $25,000 for the Bond of Qualifying Individual, etc.). The deposit must be made directly with the State Treasurer, not a private bank, and is held under the same claim and priority rules as a surety bond under §7071.11. There is no partial-substitution or 5:1 leverage rule. Although workable, the cash deposit ties up capital and is uncommon — most contractors use surety bonds.
Law Reference: Bus. & Prof. Code §7071.12Practice all 1605 questions free — no signup required.
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Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)