Financial Statements: What do the Banks/Bonding Companies Really Want to See?

Construction business owners regularly have to report to financial institutions. Whether they are requesting a bank to increase their line of credit, or asking for a loan, or they may need to get bonded or insured for an upcoming project, it’s important that the owners have all of their financial statements in order before they approach the bank or bonding agent. Fortunately, there are rules and guidelines that owners can follow to ensure they are preparing the right types of statements and doing so correctly. Called GAAP (Generally Accepted Accounting Principles), these rules are set by the FASB and promote transparency in accounting.  

GAAP requires the following 5 statements to be included in a complete set of financial statements:

  1. Balance Sheet.
  2. Income statement.
  3. Statement of stockholders equity.
  4. Statement of cash flow.
  5. Footnotes. Footnotes break down the balance sheets and provide more detail on each account.

Key Footnotes for construction companies should include:


1. Contract Receivables

Contract Receivables show how much money a company has billed but has not collected yet. They should be separated out into categories showing the aging of the receivables (0-30 days outstanding, 30-60 days outstanding, 60-90 days outstanding, etc.). Retainage on contracts should also be in a separate category. Banks and bonding agents may feel it is a red flag if a company has an excess of contract receivables that are over 90 days overdue excluding retainage.  

2. Contracts in progress

This gives a snapshot of the company’s year-long activity and should include completed contracts, jobs in progress and indirect costs which ultimately reconciles revenue earned and costs of construction to the income statement.  

3. Debt footnote

This describes the company’s financing arrangements, such as line of credit (how much are they extended?) and long-term debt and terms (when will it be repaid?). This helps the users of the financial statements determine how much cash flow is needed to service debt and also if there is any large balloon payments coming due.  

4. Backlog

The backlog shows how many contracts have been signed, but on which the work has not been done. Banks/Bonding companies like to see a healthy backlog as this provides assurance there is more work in the pipeline to pay off future debt obligations.  

What do I need to show the bank?

A construction company may need to present financial statements to banks when they are requesting an increase in their line of credit or are applying for a loan. They also need to make sure they have all their financials in order as they go into year-end tax planning. Banks tend to focus heavily on balance sheet, which tells the story of how strong the company is financially. Additionally, banks like to see footnotes included, which tell a more in-depth story of the company’s financial stability.  

What do I need to show bonding companies?

While bonding companies will also be looking at the above financial statements and footnotes, they will also be focused on Supplemental Schedules. These include:  

1. Summary of earnings

This is a snapshot of completed contracts, jobs in progress and indirect costs. This summary of earnings should paint a picture of the margin the contractors are making and should also give an accurate picture of how well jobs are being estimated. For example, if a contractor is routinely estimating to make 30% on projects and most completed projects come in at 20%, the reason for the profit fade may need to be addressed. It could indicate that projects are being aggressively estimated, that project managers are fading on the job or that indirect costs are not being allocated correctly.  

2. Schedule of contracts in progress

This gives the details on the margins a company is expected to make, how far along in the process jobs are and billing to date. Bonding companies are looking to make sure contractors are up-to-date on billing jobs and are again making sure estimated margins and actual margins are consistent. This detail on a job by job basis is an important feature to bonding agents.   Here at Lutz, we know what the banks, bonding and insurance agents are looking for and can help you prepare financials that follow GAAP standards and present your company in the best possible light. Preparing these financial statements can also help us get an accurate picture of the health of your construction company and identify red flags before they become emergencies. If you have questions about preparing GAAP financial statements or other accounting questions, please feel free to call Ryan Cook at 402.827.2085.


Ryan Cook







Ryan Cook is an Audit and Consulting Shareholder at Lutz with over 11 years of experience in accounting and assurance and five years in business valuation. He provides accounting, auditing, and consulting services to privately-held companies, with in-depth experience in the construction industry.

  • American Institute of Certified Public Accountants, Member
  • Nebraska Society of Certified Public Accountants, Member
  • Certified Public Accountant
  • Accredited in Business Valuation
  • BSBA in Finance and Accounting, University of Nebraska, Lincoln, NE
  • The University of Nebraska at Lincoln School of Accountancy, Advisory Board
  • Boys and Girls Club of Lincoln, Board Member
  • Habitat for Humanity's Annual Fundraiser (Brew Haha), Past Committee Member


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