Navigating Surety Bonds with a Bad Credit Score
If you’re planning to start a medical marijuana business, you’ll need a surety bond. A surety bond is a legal contract between three parties: the principal (you), the obligee (Oklahoma Medical Marijuana Authority), and the surety company (bond issuer). It guarantees that you’ll comply with state regulations and fulfill financial obligations. However, your credit score can affect your ability to get a bond and the cost of the premium.
How Bad Credit Affects Surety Bond Premiums
When you apply for a surety bond, the surety company will check your credit score and financial history. If you have a low credit score or a history of bankruptcy, foreclosures, or late payments, you’re considered a high-risk applicant. That means you’re more likely to default on your bond obligations, and the surety company will charge you a higher premium to compensate for that risk.
In Oklahoma, the minimum required bond amount is $25,000 for a dispensary, $50,000 for a cultivation facility, and $75,000 for a dispensary and cultivation facility. If you have bad credit, you may have to pay a premium of 5 to 15% of the bond amount, which can range from $1,250 to $11,250 depending on your creditworthiness and the surety company’s policies.
Options for Getting a Surety Bond with Bad Credit
While bad credit can make it harder and more expensive to get a surety bond, it’s not impossible. Here are some options:
- Shop around: Different surety companies have different policies and rates, so it pays to compare multiple options and negotiate the best deal.
- Get a co-signer: If you have a friend, family member, or business partner with good credit, you can ask them to co-sign your bond and share the financial responsibility.
- Show proof of financial stability: If you can demonstrate that you have sufficient assets, income, or collateral to cover the bond amount, the surety company may be more lenient with your credit score.
Get Help from a Medical Marijuana Business Attorney
If you’re unsure about your eligibility for a surety bond or need help navigating it, contact me, an OMMA regulation lawyer, at oklahomamedicalmarijuana.attorney.