Experienced Legal Representation to the Construction Industry in New York City

Should a contractor ask to be paid in advance? 

| Mar 19, 2021 | Construction Disputes

As a contractor, payment issues can be tricky. The future homeowner wants to pay when the job is done because that’s when they’re actually getting the home that they hired you to build. For you, though, getting paid at the end represents a risk. You’ve already done all of the work and you are out time, materials and significant expenses if the client then fails to pay.

Can you ask for payment for on a project in advance? You can try, but there are other options to consider. 

Have you considered connecting payments to progress?

It is uncommon for people to pay contractors entirely upfront. Many consider such a request a “red flag” and will refuse to do it. They’ll hire someone else. 

What is common, however, is taking a down payment — 10% of the job, for instance. This shows that the client intends to pay and can do so, and it gives you the capital to buy materials and pay the crew. 

If you’re worried that a down payment is not enough, some recommend connecting payments to progress. You could take that down payment at the beginning and then additional payments when the home reaches 25%, 50% and 75% completion. This ensures that you get money over the course of the job and lowers the risk because the outstanding balance at the end is not nearly as large. 

Are you currently involved in a debt dispute?

Even taking these precautions does not guarantee you won’t have disputes and debt collection issues. These can really hold your construction business back, so you must know what options you have to collect on the money you are owed.