Posted by: jmwilsonmga | February 12, 2013

Bonding For Your Commercial Contractors : Financial Statements

Do you write insurance for commercial contractors?  If so, then chances are you also need to issue some bid and performance bonds for these same contractors.  And with December 31 being the fiscal year-end for most contractors, right now is a good time to be asking for or following up for the fiscal year-end financial statements for these contractors.

Every bond company requires a fiscal year-end financial statement on each contractor for whom they have a bond file.  They generally will want to see an interim statement once or twice throughout the year, but they REQUIRE fiscal year-end financial statements!

The type of presentation for these financial statements is also an important consideration in the bond underwriting process.  Financial presentation types can be:

     *  in-house or software program printout

     *  tax returns

     *  financials prepared by a PA (public accountant) or EA (enrolled agent)

     *  financials compiled, reviewed, or audited by a CPA (certified public accountant)

As you might expect, more sophisticated financial statements are required as the size of a bond need increases.  Most bond companies have their own financial statement requirements based on the bond/job size, but a general parameter looks as follows:

     *  bonds up to $250,000 – in-house, tax returns, PA or EA prepared

     *  bonds over $250,000 up to $1,000,000 – CPA compiled

     *  bonds over $1,000,000 up to $2,000,000 – CPA reviewed

     *  bonds over $2,000,000 – CPA audited

Again, these parameters are not cast in stone for each bond company, but they give you an idea of how the bond company might be thinking.

Lastly, most bond companies have a time frame for when they require these fiscal year-end financial statements.  The time frames generally are:

     *  within 30 days of fiscal year-end – in-house, software program printout

     *  within 60 days of fiscal year-end – tax returns, PA or EA financials, or CPA compiled

     *  within 90 days of fiscal year-end – CPA reviewed

     *  within 120 days of fiscal year-end – CPA audited

Obviously, the sooner these financial statements can get done, the better for the contractor. This is especially important for those contractors with a 12/31 fiscal year-end, as February, March and April are busy bidding months trying to obtain work for the rest of the calendar year.  And if a bond company can’t get the fiscal year-end statement in a timely manner for a contractor, then they may have to put a hold on an account until such time as the statement is completed.  This can be very difficult for a contractor in his busy bidding season!

Hopefully, I have shared with you some basic information on financial statements and their importance in the bid and performance bond underwriting process.  Should you have any other questions, or need some guidance with bonding for a contractor  you are working with, please don’t hesitate to contact me.

Steve-Kuykendall---Bonds-blue-copyAbout The Author : Steve Kuykendall, Surety Manager

Steve has been a proud member of the J.M. Wilson Team since 2000 and currently serves as the Surety Manager. He has been in the surety business for 36 years as an underwriter, an agent, and as a broker.  He really enjoys the challenge of trying to find a way to write a bond and loves helping agents and their account obtain a bond that so many times they have not been able to obtain anywhere else!  He is married with four grown children, as well as nine grandchildren!  He also enjoys golfing, boating, and fishing.


  1. […] my last blog in February, I discussed financial statements and their importance for contractors wanting to obtain bid and or performance bonding.  In this blog, I want to briefly discuss the […]

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