Special Features of Construction Companies' Financial Statements

Securities for Advance Payment

In the construction business, clients are often ready to make part of the contract sum due available to the contractor in advance - in some cases even the whole sum.

For the construction company this is a very flexible form of financing which corresponds closely with the liquidity requirements of construction. Since, in the beginning, no return services have been rendered for this advance payment, the client practically always expects a first-rate security. The latter is usually provided by guarantees of a credit institute with which the construction company maintains business relations.

The liquidity situation of the construction company permitting, securities for advance payment can also be provided by pledging liquid assets such as securities. This leads to a significant reduction of costs - especially in the case of large-volume advance payments - as compared to bank guarantees which are subject to commission.