CONSTRUCTION CONTRACTORS: UNDERSTANDING YOUR MONETARY LIMIT

TNTAP – LOGIN NOW REQUIRED
August 31, 2017
Personal Finance Series
September 18, 2017

CONSTRUCTION CONTRACTORS: UNDERSTANDING YOUR MONETARY LIMIT

By Jeremy Wright

Back in August of 2016, BCS wrote a blog on how to obtain your contractor’s license. Today, we would like to discuss a contractor’s licensed monetary limit.

What is a Monetary Limit?

The Construction Contractor Application Package for the State of Tennessee describes the monetary limit as “the total dollar amount per each individual contract or project” that a contractor can legally contract or bid on. The monetary limit is 10 times the lesser of working capital or net worth. Working capital is current assets minus current liabilities. Net worth is total assets minus total liabilities. A contractor can use a financial statement from the previous 12 months, and can also supplement their working capital and/or net worth with a line of credit or personal guarantee.

A simple example would be a contractor with $10,000 in working capital and $15,000 in net worth: Their monetary limit would be $100,000 (working capital of $10,000 times 10). It is important to note that experience is also considered in determining your monetary limit.

How can BCS help?

BCS’s construction contractor’s team is uniquely qualified to assist you with these cumbersome calculations, leaving you more time to run your business. BCS can help you determine the best time frame to apply for or renew your license. We can also advise you in way to improve your financial metrics to help your qualify for the monetary limit that you need to perform your job.

BCS is committed to helping our construction contractor clients achieve their goals. In addition to helping you determine your monetary limit, BCS also offers a full suite of services for construction contractors that can be found here.

Leave a Reply

Your email address will not be published. Required fields are marked *