Obtaining Contractors License For Purchase

May 23, 2024

by a searcher from Northern Illinois University in Chicago, IL, USA

Does anyone have experience obtaining a contractors license for a purchase? I have come across several businesses that require the license, but I currently don't hold one. Has anyone taken the exam to get the license without a significant work history in the trades?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

^redacted‌ thank you for the tag. The rules for licensing vary quite a bit from state to state. I would start looking at the State laws related to licensing requirements in the states you are searching in. That should tell you what is needed. In some states you need certain experience or training to qualify for the license. If you do not have that experience then it will be more challenging for you to acquire that type of business in that state. However, even if you are not licensed you still have options including the following:

1) You could bring in a minority partner with the license to help you acquire the business and use their license. Some lenders may require that individual to sign at least a limited guarantee to ensure they will stay in place and support the licensing of the business.

2) In some states if there are employees that quality to meet the licensing requirements, you can use those employees to meet that requirement. However, most lenders will want multiple employees on payroll that can meet that requirement to be sure you do not lose the license if one of them leaves.

3) If the seller maintains the license, you could do a partial business acquisition and keep the seller on for some minority ownership interest. If they own less than 20% they are not required to guarantee the loan under SBA standards if you were to use SBA financing. You can then keep the seller involved and have them maintain the license.

If you were to move forward with one of the above options most lenders would still want you to have a plan to get a permanent solution in place to keep the license in place. I hope this helps. If you would like to discuss in more detail you can reach me here or directly at redacted Good luck.

Reply by a professional
from University of Notre Dame in New York, NY, USA

Thanks for the tag ^redacted‌ ... ^redacted‌ nailed it. I do a lot of deals involving the transfer of licenses that are required to run the business. The laws vary significantly state by state involving the transfer or qualification of an existing business license (e.g., New York - easy; California and Nevada - extremely difficult).

For the more difficult jurisdictions, options involve either (1) keeping the Seller on in some capacity to qualify the license (whether its an officer, employee, partial equity owner or a combination); or (2) hire a third party RMO/RME who is not the seller to qualify your license. You also need to consider whether the business owner holds the license personally or the LLC/Corp holds the license. In some states, any change in control of a license held by an LLC/Corp will automatically cancel the license which kills the deal.

In most states, however, the process is usually simple and licenses can be acquired via sale. It's just a handful of states which require some careful navigating. Feel free to DM me or email me redacted - happy to chat through.

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