Down payment

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nyerinfl

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Broward Co.
Hey all,

I have a question about down payments on contract work. Would like to hear what some other do. My question is stemming from the fact that I had been awarded a job about 7 months ago, already have a permit for this job and at one point had bought material to start the rough then the job fell apart completely.

Now I've gottan calls from the people who have taken it over and want this job to start ASAP. However, given the circumstances of this job and the history I don't want to invest one more cent into this job without a down payment.

I'd like to know from other commercial contractors dealing with GCs if they have a down payment prior to work starting as a standard stipulation of the contract? My contract is for $20,000, I wan't 30% down, so $7,000. Is this similar to what others have? Thanks for reading this/any feedback.
 
we have had this discussion many times on this forum. Here in NC if you ask for a deposit, on what Im assuming is a small fit-up, the GC will laugh in your face. We have taken deposits for 2 projects , both of which had emergency generators that were over $50,000 by themselves and the vendor needed 20% down to ship. I think it is illegal by the electrical board here to take deposits. I know for sure that if you get in trouble with the board one of the guidlines is you cannot take any money until the project is completed or substantially so. The only reason I know that is because they publish it in the newsletter ever month or so.
 
Commercial work is typically paid out in accordance with the schedule of values and sometimes you can get paid for stuff you store on the job. You can also front end load the schedule of values. Normally, you can figure out a way to time some purchases so that you can get paid for them (by having the stuff on the site) around the time the bill is due the vendor. There's lots of ways to play the game, and a downpayment is only one way. Do work out of order, and get paid for some expensive profitable stuff early. Cash flow can be scary, but it becomes a really fun game after a while.
 
new GC = new contract = new price.

If they don't want to pay the new price (materials and labor prices have increased ya know!), then they can pay your for your time to remove yourself from the permit. You could also inform the owner that you have incurred charges from the first contract and that if they are not paid, assuming you do not get the work with the 2nd GC, that you will be filling a lien on the property.

When you increase your prices, that is not a opportunity to stick it to them, but you should certainly reprice your material, labor, and OH and increase accordingly.

Oh, the longer you delay in giving them a new price, and finalizing the new contract, the better position you are in to dicate your new terms, however you will probably not get a deposit. You can always bill for mobilization and material on site, the first day you get there.
 
nyerinfl said:
Hey all,

I have a question about down payments on contract work. Would like to hear what some other do. My question is stemming from the fact that I had been awarded a job about 7 months ago, already have a permit for this job and at one point had bought material to start the rough then the job fell apart completely.

Now I've gottan calls from the people who have taken it over and want this job to start ASAP. However, given the circumstances of this job and the history I don't want to invest one more cent into this job without a down payment.

I'd like to know from other commercial contractors dealing with GCs if they have a down payment prior to work starting as a standard stipulation of the contract? My contract is for $20,000, I wan't 30% down, so $7,000. Is this similar to what others have? Thanks for reading this/any feedback.
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Your story tells it all, always get a down payment and a signed contract, if the Owner or GC gives you the old BS of we don't pay deposits on jobs, run don't walk, away.

I have no idea where the crazy idea of GC of commercial accounts, don't sign contracts or pay deposits came from, as a metter of contracting in our state, it is a law to have a signed contact on any jobs over 500, and to make a contract legal in some states, you need a deposit.
 
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satcom said:
Your story tells it all, always get a down payment and a signed contract, if the Owner or GC gives you the old BS of we don't pay deposits on jobs, run don't walk, away.
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Is that common practice in your area? If I followed that I would never get another bid job here.
 
SmithBuilt said:
Is that common practice in your area? If I followed that I would never get another bid job here.
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That is how most business operate, it has nothing to do with the area you operate, but the people your dealing with, You may want to find contractors with the ability to pay, they will not use the we don't pay down payments excuse.
 
SmithBuilt said:
Is that common practice in your area? If I followed that I would never get another bid job here.
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That is how most business operate, it has nothing to do with the area you operate, but the people your dealing with, You may want to find contractors with the ability to pay, they will not use the we don't pay down payments excuse.

You do eniough deals without a down payment, and they will be laughing at you, as just another fish.

You can extend credit to some companies, that have established commercial credit lines, and are willing to assign payment, these are the commercial contractors we extend credit to, with a contract and payment terms.
 
satcom said:
You can extend credit to some companies, that have established commercial credit lines, and are willing to assign payment, these are the commercial contractors we extend credit to, with a contract and payment terms.
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I've never considered it extending credit. I'm only referring to commercial construction. Payment terms are always stated in the contract. Normally one month's worth of work, bill the contractor at the end of the month then get paid by the end of the next month. I also have penalties and 2% per month interest if they do not pay on time.

Is that similar to what others terms are? Where I'm at I have never seen a deposit on commercial construction that I bid on. You bid on their terms not yours, or you don't bid.
 
For me there are several methods.

For a service upgrade with a HO. I usually ask for a deposit that covers the permit (no refunds from the city on those), any material I cannot return (e.g. feeder wires) and maybe a couple of hours of labor (@ my lowest rate).

For a couple of my GC's that I have many years of work with. I usually bill out by the end of the supply house billing cycle.

The last new GC I acquired I asked for 10% to start then an appropriate % (depending on the job) after rough and after trim.

On one residential job that had a $30,000 service upgrade, I asked for $10K deposit (to cover the entire cost of the 800 amp SES), $10K after rough, $10K after change over.

I'm always trying to keep my company out of any financial binds, aaaand I don't want to finance somebody elses job. I'm not a banker.
 
SmithBuilt said:
Is that similar to what others terms are? Where I'm at I have never seen a deposit on commercial construction that I bid on. You bid on their terms not yours, or you don't bid.
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The thing is about this job, is the balls in my court. This job has been delayed so bad because of a snake GC who got replaced that it has basically been taken over by the buildings owner. The way I'm looking at it is that either they can pay me my deposit, and I start work, or they don't and can find another contractor. I'm not so desperate for this work that I can't afford to lose it, and with the history of this job I'm not willing to lose any more money.

There is a payment schedule in the contract that I will be getting signed maybe today, and either they give me the deposit, or I walk basically.
 
nyerinfl said:
I'd like to know from other commercial contractors dealing with GCs if they have a down payment prior to work starting as a standard stipulation of the contract? My contract is for $20,000, I wan't 30% down, so $7,000. Is this similar to what others have? Thanks for reading this/any feedback.
Click to expand...

On a job that size the most I feel you will get is to draw a mobilization fee of about $1,500 on your next scheduled draw. For this to work you need to have the $1,500 built into your schedule of values that you will be drawing against for the job. If it's a new GC then you have time to build up a new SOV and slip this in and get a new contract while you are at it. With any luck you will have your money in 45 days.

Also keep in mind if its a new contract you may be able to negotiate for impact and price of materials increase.
 
Beings as how you are going to be working for the building owner directly you can ask for a deposit and see if it flies. It might. Working for generals around here it is a schedule of draws as most are stating, and most times it is 30 days from invoiced time. That often means have your invoice in by the 25th for work that will be done by the 31st. Hope for payment possibly before the end of the next month, hopefully by the end of the first week of the next month. If not by than consider trying to invoice as much as you can possibly get away with on the next invoice or 2.
 
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