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Surety Bonds

Business Financial Statement Forms

by Michael O'Brien

Business financial statement forms are required from a construction company desiring to be bonded. For contractors to get bonded, they must prove to the surety company financial strength and strength of character. For the surety company to take a risk, they have to be confident that the contractor will complete the project within their means and contractual obligations.

Review of Business Financial Statement Forms

Certified Public Accountants (CPAs) review the past work and business financial statement forms of the contractors. They usually look back at least three years into the business. The CPA will give their professional opinion as to whether or not the contractor is a good risk for the surety company. They then send a management letter outlining their findings.

The surety company expects the contractor to fulfill all obligations. This includes construction coming in on time and within budget. If the contractor fails to meet its obligations and has to default, the surety company is responsible for indemnity. That is, they are obligated to make the owner whole by paying for any financial losses.

Importance of CPAs

Surety bond companies rely heavily on accurate data and well-informed opinions of their CPAs. Business financial statement forms and other financial documentation must reflect responsibility on the part of the contractor. If the contractor does not seem to be reliable, he will not be bonded. If he is bonded, the surety company becomes liable for his performance.

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