# Downpayments



## andrew07 (Jul 3, 2007)

How do you guys handle them on a smaller job say $0-5,000 or $5,000-10,000? 1/3 down, 1/2 down? Or other?

What about bigger jobs 1/4 up front and then 1/4 every stage of completion? Or other? Thanks


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## mdshunk (Mar 13, 2005)

Don't do it this way.... but you asked....

0 dollars down, and full balance on completion. 

It's a stupid way, I know, but you aked...


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## andrew07 (Jul 3, 2007)

mdshunk said:


> Don't do it this way.... but you asked....
> 
> 0 dollars down, and full balance on completion.
> 
> It's a stupid way, I know, but you aked...



Hmmm interesting, I don't think that is for me but if it works for you. I would like to have at least my materials covered. I think it would be less hurtful to the HO (at least their wallet) to pay in installments than one lump sum. You never had problems doing it that way?


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## PARA 1 (Jul 10, 2007)

*Down Painment..*

:thumbsup:WITH CUSTOMERS WHO ARE UNSURE I HAVE DONE A TAKEOFF AND THEN ORDERED MATERIAL...WHEN CONTRACT IS SIGNED I ALLOW THEM TO GO PAY FOR ORDERD MATS AND WORK BEGINS .


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## mpvoss (Nov 29, 2005)

I get one third down and balance at completion on most jobs. If anything unusual half down and then balance.


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## Joasis (Mar 28, 2006)

All payments are staged on new construction....steel buildings require that all materials are paid for before I put the job on the schedule.


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## tnt specialty (Apr 19, 2007)

Never asked for a down payment in 24 years; $ 500 to $ 1.3 mil.


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## ChrWright (Jul 17, 2007)

*Deposit*

Deposit=Commitment

For smaller projects that's not always necessary, especially for repeat clients...But anything over $5,000 and you're financing your customer's project by not taking a least some money up front.


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## Grumpy (Oct 8, 2003)

0-$1000 no down payment required unless I am ordering something custom in which case it will usually cost more but..

$1,000+ about 33% down at contract signing, with final upon completion.

Let's throw some monkey wrenches into that formula. If the job is custom order I always cover my ass and get at least as much as the materials will cost, plus a profit for the materials. If a job is going to take more than 1 week to compelte, I require progress payments.

On commercial jobs I often require 25% at signing, 25% at material delivery, 25% at half way completion and final due upon completion.


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## dirt diggler (May 14, 2006)

Rule Number One (for me)

down payment is small and covers first phase materials. Materials that are covered get delivered within the next couple days. 


they're NOT to be used to pay bills, pay Peter, etc. this gets messy and causes the worst stress


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## Flikka (Feb 22, 2006)

When I first started I would ask for a deposit for materials, now I don't unless it's a huge investment on my part. With jobs that last for weeks I'll submit a weekly billing and have always had a cheque waiting for me on the job site the next day. But mostly it's 0 down with a bill when the job is complete. So far so good for the most part.

Cheers
Mary


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## j3ivy76 (Jul 17, 2007)

Im new to contracting, I have only been in buisness for about 10 months but I have been requiring 50% down, third quarter when job is half way , and last quarter upon completion.


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## kevjob (Aug 14, 2006)

some states limit the amount of the down payment.


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## Heritage (Mar 20, 2007)

I take a deposit equal to the cost of materials for jobs that are 1k plus.

Small claims sucks, chasing money sucks.

If the job is more than a week I break down a payment schedule.

1 month job equals 1 down payment, 3 progress payments and the final upon completion.

I won't set foot on a job site without a written contract, even for a $200 job.:no:


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## POOLMANinCT (Oct 7, 2006)

1/3 1/3 & 1/3


also pool will be impossible to fill until I get 3rd... a purposeful 
reason to not including 
h20, nor will faceplates 
go on.....


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## Driftwood (Feb 15, 2004)

*Against Ca. law , But is survival!*

1/3 down ,1/3 when 1/2 through 1/3 at completion. when You're 1/2 complete You have 2/3s the $$$$. I'm not a bank for homeowners projects! Never had a problem! Been doing this over 40 Years. We do great work,that,s why


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## tnt specialty (Apr 19, 2007)

As a consumer, it's a big, fat red flag when a contractor asks for a "deposit" or "downpayment".

That represents misstrust or financial inability, or possibly both. Plain & simple. Two very negative aspects.


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## Heritage (Mar 20, 2007)

tnt specialty said:


> As a consumer, it's a big, fat red flag when a contractor asks for a "deposit" or "downpayment".
> 
> That represents misstrust or financial inability, or possibly both. Plain & simple. Two very negative aspects.


As a contractor, it's a big, fat red flag when a Home Owner argues about a "desposit" or "downpayment".

That represents financial inability and an unwillingness to make a commitment. Plain & simple. Two very negative aspects and I walk away from the job.


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## Driftwood (Feb 15, 2004)

*Red Flag , Are You Kidding??*

Been doing this for 45 years. Most of My customers are repeats ,and Many I consider friends ! There are consumers that will stiff a cont.
My Nephew never saw $40,000 in extras. And He does great work. Now He has to work for someone else ! Tell Him about RED FLAGS :whistling


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## Norrrrrrrrrrrrm (Jan 20, 2007)

I also do 1/3 installments. 1/3 After the first day, 1/3 when I am half way through and the final 1/3 when I am completed. I have never had a problem with this method.


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## Vinny (Jul 21, 2007)

Driftwood said:


> About 14 for down payments, and about 7 ar rolling the dice :clap:


I think "roll the dice" is a good paralell. But this isnt A.C. (Atlantic City for you non north easterners)


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## tinner666 (Nov 3, 2004)

Sometimes I do, Sometimes I don't. And 80% of my work does NOT have a written contract. Last week, I completed a job for my old boss. Did the work, faxed a bill. THat was the sum total of our written contract.
I had a written contract on the Porsche Place. No deposit.
Did a $60K copper roof. 33% down, 2 draws, balance on completion. No written contract.
Asking for a deposit and a couple of draws on a written contract going out Mon. 

Each job has it's own Karma, dictating my actions. TO each his own!


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## Vinny (Jul 21, 2007)

tinner666 said:


> Sometimes I do, Sometimes I don't. And 80% of my work does NOT have a written contract. Last week, I completed a job for my old boss. Did the work, faxed a bill. THat was the sum total of our written contract.
> I had a written contract on the Porsche Place. No deposit.
> Did a $60K copper roof. 33% down, 2 draws, balance on completion. No written contract.
> Asking for a deposit and a couple of draws on a written contract going out Mon.
> ...


 
You right, to each his own is the way it ends up and over time and experience one can make those decisions from an educated stand point, but the original question came from a beginner looking for advice, and that advice, in my opinion should have the best long term buisness perspective. My only other point would be as your buisness grows, if it grows, you want to have a standard and consistantly applied policy that can be systematized and handed off to someone else that doesnt have to reinvent, or should not be adlibing, the monetary policy of your buisness.


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## Magnettica (Dec 19, 2006)

One way to avoid getting screwed is to not work for a GC.


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## Amber (Aug 20, 2006)

California, 10% down, 40% progress payment (when materials are ordered) and the rest upon completion. This way as least the materials are covered when you run into the occasional *******.


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## KillerToiletSpider (May 27, 2007)

Magnettica said:


> One way to avoid getting screwed is to not work for a GC.


We only work for GC's, if the homeowner is the GC, we don't want the work. We don't ask for a deposit, but we also do not order fixtures until the rough is 80% done, and we have been paid one third of the contract for the rough, unless the fixtures involved include non returnable items, such as $20,000 handmade wood bathtubs, in which case the cost of the fixture is included in the first draw.


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## dirt diggler (May 14, 2006)

Magnettica said:


> One way to avoid getting screwed is to not work for a GC.


not a fair statement and you know this, right?


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## Magnettica (Dec 19, 2006)

dirt diggler said:


> not a fair statement and you know this, right?


All I know is I am promised one thing and settle for something else.

Those are the GC's I am talkin' bout!


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## kevjob (Aug 14, 2006)

then don't work for a**holes!


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## dirt diggler (May 14, 2006)

Magnettica said:


> All I know is I am promised one thing and settle for something else.
> 
> !


 that's a problem you can & need to fix then


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## ModernStyle (May 7, 2007)

I never ask for a down payment, if I feel that the job will be a long one or that the customer might not be the most honest person in the world, then I will bid the job in installments. Like once the wallpaper is removed you owe me $1000, once the ceilings are painted you owe me $2500. I write each thing up as a seperate bid, if they dont pay for something then the job stops and we leave. I have had a couple of HO's complain because they had to write me a bunch of checks instead of just one, but too bad, I have a family to support and I cant afford to trust strangers when my family is at stake. I am just a small time painter and sometimes I get to where every cent counts , so I dont feel bad about trying to insure that I will be paid.


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## tinner666 (Nov 3, 2004)

I should have pointed out that 'My way' involved due consideration of my finances at the time of each decision.
When I first started, all my work was by referrals and from my ex employers. I was told by my bosses I could make more by subbibg, and it eliminated quesswork on their part on what the final cost would be on any given job.
I still do work for old Bosses, and all my other work is referral based. When I had 2 crews of 4-5, my business decisions on downpayments and draws were the same as they are today. I've downsized to just me now, and work a limited schedule today.

If you woke up one morning and decided to start a business, you could be relying on cold leads, advertising, and "0" referrals. A different business model may well be the way to go, with set policies and pricing.


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## tnt specialty (Apr 19, 2007)

Magettica; You've got that right!

Modernstyle; There ya go! Pretty-much the same here.

Alot seem to be confusing progress payments for deposits/downpayments......

And for those of you that do any substantial amount of subcontracting......Say, for a major homebuilder?.....Could you imagine asking for a deposit, before any work or service is provided? They'd laugh you out the front door! Your lucky to be paid net 30 days! And there's AWAYS a fight at the end of the project and/or relationship it seems.


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## Metcon (Jul 20, 2007)

Remember several things before you take any deposits.
1- how much you can ask for legally in your state.-
2- make sure you place it in an un-earned account seperate from your reg Checking. When you have earned the money then you can transfer it to your reg account.


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## AdminFauxPaint (Dec 27, 2007)

*We get 50% down...*

We do high end painting and faux in NYC, and after reading about others (and having our own experience) at this thread:

"Contractor Talk - Professional Construction and Remodeling Forum > Business Discussion > Business > Non paying customers?"

We are now also going for regular intermediate payments on jobs that last over a few days/week and leaving as little at the end as possible.

I can't post a link to that thread (too new here) but would appreciate any of your more experienced thoughts on my last post on that thread.

TIA.


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## tnt specialty (Apr 19, 2007)

No downpayments here.....


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## woodchuck2 (Feb 27, 2008)

For me it depends on the size of the job, if the job is large then there is a good chance i cannot financially pay for the whole thing until completion so i ask for 1/2 when i am approx. 1/2 way through the job to cover at least the materials. An example would be wiring a large home, i like half when the rough in is inspected. This pays for my materials and gives me $$$ for the fixtures so i am not paying someone interest whether it is store account or credit card. I saw my old boss get burned once for not asking for a payment. He wired the whole house, paid me and the inspector, paid for all the custom fixtures and switches/dimmers and never got paid for almost 9 months after completion. He lost several store accounts and lost money due to interest that had built up. The house was for a celebrity who had paid the contractor in full and would not pay my boss claiming the payment issue was between my boss and the contractor which he was correct about. I remember some of those light fixtures were $1500-2000 each.


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## mahlere (Aug 6, 2006)

tnt specialty said:


> Never asked for a down payment in 24 years; $ 500 to $ 1.3 mil.


why do you insist on telling guys to follow a strategy that years of averages tell us is bad?

go with the averages guys and gals...averages are, you are better off getting a down payment.

tnt is the exception, not the rule...and if you do a search here, you will find where he got stiffed for $30k on a job...

so while he is proud that he never took a down payment, in the real world, its a bad business plan...

good luck with it though...


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## Tiger (Nov 21, 2007)

It varies but always something substantial in advance unless it's a day job. It can be 50% in advance, a couple progress payments & only 5-10% at the end. In additions/new construction it's 10-20% in advance, most at rough, and again only 5-10% at the end. Cash flow is always better with front-loading.

Dave


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## J F (Dec 3, 2005)

I always like to get 100% down, and the rest when we finish.:whistling

Not sure why I can't get anyone to agree to those terms though...gotta work on our sale presentation, obviously.

J


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## wellbuilthome (Feb 5, 2008)

On a small job 5000 or less No deposit $10000 1/2 at job start 1/2 when done. Work order changes are pay as you go . Most of my work is around 60,000 and i get a 1000 for plans and premits . job start 1/3 and there are 4 payments + last payment & balance of work order changes I break up the payments so its fair . On small jobs i like to send a invoice in the mail . with a due now $ xxxxxx I do have a great contract . I never have a problem with the first payment . I find that if I dont harp on the money to much the owners pony up the bucks.


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## tnt specialty (Apr 19, 2007)

mahlere; "Deposits" are no guarantee of payment.....The payment problems typically arise when work has been complete.....anyone with any real sense knows that.....Deposit or not....a client is gonna screrw ya if he/she has it in them.....no matter what .....unless of cousre one is paid complete/up-front.....

Good grief! Do you guys really have that much problem collecting $? I've always found my energies spent on providing an exceptional service pays off, (no pun intended), as opposed to wringing my hands over how to collect $......you do good work......most will pay you......If that ever changes substantially....I'll get the heck out of the biz!!!!!........... Life's too short.....


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## mahlere (Aug 6, 2006)

tnt specialty said:


> mahlere; "Deposits" are no guarantee of payment.....The payment problems typically arise when work has been complete.....anyone with any real sense knows that.....Deposit or not....a client is gonna screrw ya if he/she has it in them.....no matter what .....unless of cousre one is paid complete/up-front.....
> 
> Good grief! Do you guys really have that much problem collecting $? I've always found my energies spent on providing an exceptional service pays off, (no pun intended), as opposed to wringing my hands over how to collect $......you do good work......most will pay you......If that ever changes substantially....I'll get the heck out of the biz!!!!!........... Life's too short.....


there is never a guarantee...but why fight the odds? why do I want to bankroll a project if I don't have to? a down payment and progress payments along the way keep us ahead of the customer...so if they balk at the end, i lose profit, but I don't pay out of my pocket for materials and/or labor...anyone with any real sense knows that...

maybe it's living and working in the NY/NJ area that makes me jaded...but I think you are the exception, not the rule, when it comes to operating the way you do and not having problems...but mostly I think it's bad advice to a young contractor...the odds are against it working for them like it seems to be working for you...


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## mahlere (Aug 6, 2006)

and let me ask 1 more question, since you don't take down payments, do you at least run credit checks on new customers? please don't tell me you extend credit to new customers without running a credit check...do you know what that customer would have to go through to get $1.3mil in credit from a bank? 

please tell me you run credit checks...


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## CrimeCrusher (Dec 27, 2007)

There is a way to protect both the HO and the contractor. If you are interested you can email me or PM me. It's a service my company offers. Best of luck to everyone.:thumbsup:


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## mahlere (Aug 6, 2006)

CrimeCrusher said:


> There is a way to protect both the HO and the contractor. If you are interested you can email me or PM me. It's a service my company offers. Best of luck to everyone.:thumbsup:


escrow is a way to go...but then you get the points:laughing: done escrow a lot in the past with online sales...for a larger project i'd just as soon factor...unless your rates are lower than my factoring company...


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## AdminFauxPaint (Dec 27, 2007)

*Credit checks?*

Can you give me an idea what kind of language you say/print / use to get the client's SS# and their permission to run the credit check?

Afaik, I can pay $130/check to D&B and run a check on a business without their permission (which we are now considering starting with decorators who insist on signing the contract and paying us out of their pocket), but for an individual, I think in NY I have to get the individuals permission to run the credit check on them.

(we avg $4-9k/project, with a more and more of projects running to 15, 21, even 35K...)

Had some excitement collecting lately and just looking for every way to prevent losses (already learning about leaving as little as possible on the table...)

Thanks re any advice.


mahlere said:


> and let me ask 1 more question, since you don't take down payments, do you at least run credit checks on new customers? please don't tell me you extend credit to new customers without running a credit check...do you know what that customer would have to go through to get $1.3mil in credit from a bank?
> 
> please tell me you run credit checks...


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## genecarp (Mar 16, 2008)

*different strokes*



Driftwood said:


> 1/3 down ,1/3 when 1/2 through 1/3 at completion. when You're 1/2 complete You have 2/3s the $$$$. I'm not a bank for homeowners projects! Never had a problem! Been doing this over 40 Years. We do great work,that,s why


im with driftwood, i have been doing that for 23 years, never a problem, i also maintain about a dozen t& m clients, i have worked for them for many years, i keep an ongoing tab, when i need $ i write a bill, these bills range from 2,000 to 20,000, i only recommend this practice with time proven clients.


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## davinci (Dec 26, 2007)

to me,not taking a deposit is just insanity. i get between 1/3 and 1/2 down and then do stages depending on the length of the job. no matter what,i make sure the H.O. has paid for all materials. when i order "high end" windows for someone,the deposit could exceed 50%. i am not going to put up 20k for Pella windows and risk being stuck. in business there is a thing called Risk Management.


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## tnt specialty (Apr 19, 2007)

"Downpayments don't work around here!

Well, fella's...Just performed an expier-o'-ment.....if you will...

Provided a quote for a re-roof to a HO......
HO called back and wanted to get started....
Informed the HO it was our policy to have the HO pay the supplier directly for the materials prior to delivery...
They went with another contractor that didn't require any deposit/downpayment...
That's the first time in 25 years I ever asked for any type of downpayment/deposit...And it wasn't like it was a prepayment at all! It was simply paying the supplier for the materials when delivered!


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## genecarp (Mar 16, 2008)

i dont think the problem was the deposit, the problem may have been asking the HO to write a check to the supplier, most HO want to feel like all responsibility is on contractor, this split payment may have been confusing.


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## Double-A (Jul 3, 2006)

It may also have said, "My company is going bankrupt, so you'll have to buy the materials."

If you decide to repeat this experiment, try actually asking for a percentage of the job for scheduling or some such, rather than asking them to pay your bill. You might have sent the wrong message.


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## tnt specialty (Apr 19, 2007)

LOL.....:clap::clap::clap::clap:.......There ya go! That's been my whole point on this "depost/downpayment" issue!!! I would never ask for a downpayment, (never had before), it was just a piddily-little $ 8k re-roof, that I really didn't care to do anyway.....Only confirmed suscpicions.....


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## Susan Betz (Feb 21, 2007)

Double-A said:


> It may also have said, "My company is going bankrupt, so you'll have to buy the materials."
> 
> If you decide to repeat this experiment, try actually asking for a percentage of the job for scheduling or some such, rather than asking them to pay your bill. You might have sent the wrong message.


Agreed. We contract so that when the materials arrive at the jobsite, a certain percentage of the contract price is in our hands. We never have the customer pay a supplier directly. 

We lost one job where the client balked on a downpayment; the company he went with didn't require one. We were disappointed, but the company lowballed him, and he'll get what he contracted for in the end.

But for the most part, people understand that they are going to pay the cost of the contract either up front or at the end, and as long as they can see materials and work progress, it's all good.


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## DavidC (Feb 16, 2008)

I can only think of two situations where we would finance a job with our own funds or credit accounts. 

One would be an established repeat customer with a good track record for prompt payments. Unless it's a small job, you can be sure that we don't get very far into it without some payment.

The other would be a govt. grant job. Their contracts usually specify payment on completion. In these cases we include a line item that covers our interest cost whether we work out of pocket or line of credit.

In plain language I will explain to the customer that we finance the project with their funds and delayed payments can lead to delayed projects. Never had a problem getting 1/3 or 1/2 down, some even offer to pay in full up front (which I discourage). Our final payment is due on substantial completion and allows for a 5% retention in the event of a punch list or dispute.

Good Luck
Dave


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## tnt specialty (Apr 19, 2007)

We've always worked on a monthly progress/draw schedule.....Works just fine.....

The majority of our work has always been government or for GC's.....with some res. projects thrown in periodically....."Downpayments" were never an issue.....They just don't exist....

Now we do primarily res. remodel.....I've just carried over the standard practices from 25 years in the biz....

Requiring "down-payments" would just add more brain-damage to the process...

Good luck....


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## wizendwizard (Nov 11, 2007)

DavidC said:


> I can only think of two situations where we would finance a job with our own funds or credit accounts.
> 
> One would be an established repeat customer with a good track record for prompt payments. Unless it's a small job, you can be sure that we don't get very far into it without some payment.
> 
> ...


 Dave, I am having both of the problems you described right now.

Customer 1. $1700 worth of work. minor repairs handyman projects
Paid $687 down with scheduled draws at day 2 and 5 with 10% left at completion. So far they have made the down and thats it. After the 5th day missing both due payments and saying they are waiting for their income tax to come back, I put them on hold until both due payments are made.

Customer 2. $3600 roofover of mobile home. HO wants to pay me $500 this week and $300 every 2 weeks thereafter until i have 90% of monies due before i start the job. This means I can start in about 4 months. I am thinking of putting this money into a high interest account so I am at least making some money while handling her financial planning for her. I don't advise anyone doing this kind of thing either.


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## genecarp (Mar 16, 2008)

someone i know comes to me, i would desribe him as a casual friend, not a good friend, he is in dire straights, must sell his house, he was a wall street guy. as his house sits it is valued at 640,000. if he spends between 15,000 and 20,000 he will likely get near 700,000. he is asking me to do this work.after the sale i will be paid, he said i should feel free to charge him interest. (no ****) here is my thinking, forget the interest add 20% onto the final number, a lawyer i work for will prepare a promisary note, this note will include llegal fees, should i have to go after my money. thoughts or comments?


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## Double-A (Jul 3, 2006)

genecarp said:


> someone i know comes to me, i would desribe him as a casual friend, not a good friend, he is in dire straights, must sell his house, he was a wall street guy. as his house sits it is valued at 640,000. if he spends between 15,000 and 20,000 he will likely get near 700,000. he is asking me to do this work.after the sale i will be paid, he said i should feel free to charge him interest. (no ****) here is my thinking, forget the interest add 20% onto the final number, a lawyer i work for will prepare a promisary note, this note will include llegal fees, should i have to go after my money. thoughts or comments?


I would not be willing to do this without a Quick Claim Deed executed for a percentage ownership in the property equal to approximately what I'm investing plus a reasonable profit, an appraisal on the property as-is, and anything else my attorney can think of to protect me.

This guy stands to lose nothing and you stand to lose your entire investment. Do it per your usual contract or get into a limited partnership with the guy for this deal only. Either way, protect yourself and your investment.


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## DavidC (Feb 16, 2008)

wizendwizard said:


> Customer 2. $3600 roofover of mobile home. HO wants to pay me $500 this week and $300 every 2 weeks thereafter until i have 90% of monies due before i start the job. This means I can start in about 4 months. I am thinking of putting this money into a high interest account so I am at least making some money while handling her financial planning for her. I don't advise anyone doing this kind of thing either.


Assuming your comfortable with your quote and included an escalation clause in your contract I wouldn't be averse to accepting those terms. In effect you're getting a 90% down payment before starting.

I would get them on contract with the first check or sooner, use an escalation clause, schedule them in pencil until the last promised installment and ask if they have the final 10% before starting. Your state or county may have an opinion on how you handle the monies while you wait.

Sounds like you handled that first guy right. Maybe could have stopped after the first missed pay. Hindsight is 20/20. I usually wait to long myself.

Good Luck
Dave


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