Tenn. Comp. R. & Regs. 0680-01-.13 - MONETARY LIMITATIONS

(1) Generally, the monetary limitation placed on a classification of a license may be determined as follows:
(a) For applicants having no apparent deficiency with respect to plant or equipment, the lesser of:
1. Ten (10) times the applicant's net worth; or
2. Ten (10) times the applicant's working capital. Accounts receivable that are more than three (3) months overdue may not be included within the calculation of working capital.
(b) At the Board's discretion, renewal applicants having no apparent deficiency with respect to plant or equipment, but with limited working capital, the greater of:
1. Ten (10) times the applicant's working capital; or
2. Fifty percent (50%) of the applicant's net worth.
(c) For other applicants, a lesser amount reflecting the degree of lack of plant or equipment.
(2) Lines of credit and indemnities (on forms furnished by the Board) may be considered to raise a monetary limitation. Lines of credit may be added up to its full value to the working capital. Credit for indemnities will be limited to fifty percent (50%). However, if the applicant has a negative working capital, lines of credit will be recognized at fifty percent (50%) of value.
(3) A Guaranty Agreement, line of credit, bond, or other indemnity may be required in addition to the financial statement in the following situations,
(a) Applicants that have a primarily cash financial statement without fixed assets and;
(b) If an applicant company is completely or partly owned by a parent company then the Board may require the parent company to provide a financial statement along with a "Guaranty Agreement" in which the parent company agrees to guarantee the debts and obligations of the subsidiary company for all debts and obligations arising out of the contracting activities of the applicant. If the parent company cannot provide a "Guaranty Agreement" they may request the board to consider a bond in the Board's format. This bond would not be accepted in lieu of providing a financial statement.
(4) A Guaranty Agreement may be utilized when an applicant wishes to supplement the working capital and/or net worth portion of their financial statement. The guarantor must submit a personal financial statement with a personal guaranty agreement.
(5) The Board reserves the right to accept or decline Guaranty Agreements as a supplement to applicant financial statements depending on the individual circumstances of each application.
(6) If a guarantor's spouse is named on the financial statement submitted with the Guaranty Agreement then the named spouse must also sign the Guaranty Agreement.
(7) All Guaranty Agreements shall expire on the same date as the license that the agreement was provided to support.
(8) Subject to such tolerance, no contractor shall engage, or offer to engage, in any project of which the cost (including all material and labor furnished by or through another source other than the owner) would exceed the monetary limitation placed on his license. If a contractor holds a license with more than one classification with different monetary limits, the monetary limits shall not be combined to bid a project.
(a) A tolerance of ten percent (10%) of the monetary limit is allowed, except for the BC-A/r licensees.
(9) Where an applicant can demonstrate having a minimum working capital and net worth of three hundred thousand dollars ($300,000) or more, the Board may, in its discretion, award the applicant an unlimited license, allowing the contractor to bid or offer to contract on any project within a classification the contractor is licensed of any size that the contractor can financially support.


Tenn. Comp. R. & Regs. 0680-01-.13
Original rule filed July 22, 1974; effective August 21, 1974. Repeal and new rule filed January 20, 1977; effective February 19, 1977. Amendment filed may 19, 1980; effective July 3, 1980. Amendment filed September 16, 1981; effective November 2, 1981. Amendment filed October 16, 1985; effective November 15, 1985. Amendment filed January 31, 1996; effective April 16, 1996. Repeal and new rule filed October 9, 2012; effective January 7, 2013. Amendments filed June 8, 2017; to have been effective September 6, 2017. However, the Government Operations Committee filed a 45-day stay of the effective date of the rules on August 17, 2017; new effective date October 21, 2017. Amendments filed March 22, 2018; effective 6/20/2018.

Authority: T.C.A. ยงยง 62-6-108, 62-6-111, and 62-6-116.

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