New Client With £200K order! Wants credit...

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G

geester

  • #1
    We have been dealing with an architect for the past 10 months for this specific project, we are specified as one of two contractors for the main part of the project. In April the client awarded the entire contract to a well known company that was 1 week from placing an order with us then went into liquidation :eek:.

    We started again with another contractor re-negotiating etc, then last week we are told that we will get the order (our part is around £200K), only to be told today the main contractor does not have the funds to pay us...:eek::eek:

    So the client will place the order, however they are adamant that they do not pay in advance (we understand after the first contractor went bump!) We have offered 50% payment with order and the balance 30 days after completion. But they want us to get a bank backed guarantee.

    Spoke to bank this afternoon who tell us it will take some time to arrange and will be able to advise later in the week - what?????! We need an answer like now! Is this what's killing UK business -Banks dragging their feet?

    The initial deposit will pay for all components leaving profit in the job, the balance will pay for the labour leaving again profit.

    Is there any way in speeding this up and how can we give the client confidence in the fact that once they have paid the deposit we will not go POP!

    We want a win-win situation. :D
     
    G

    geester

  • #3
    Billmccallum said:
    Is it worth the risk??????

    In your position, its not your responsibility to finance a project for the client, that's their job.
    Click to expand...

    Thanks, but I do not take risks like this, the client has no trading history with us, so part payment is essential. They want some sort of guarantee from the bank to say we will not go bust once we get the initial payment - this is what happened before!:eek:

    Is there any other way as the bank told us it can take weeks - no wonder the UK is in the doldrums, we export around 99% of our products to America.
     
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    G

    geester

  • #5
    I don't know either, it was something the client asked for from us!

    They want some sort of guarantee, they will get what was quoted and not have another company take money and go bump!

    I see that Barclays offer a Part Payment Guarantee, but this is 10-20% of contract value! I don't think they will pay that...:cool:

    I am looking at different options - but still drawing a blank. :(

    I guess they would have to pay escrow fees? Who would I speak to to set up an escrow account - our bank does not do this (I asked last year on another project.)

    I don't understand "how are we going to secure it?" Can you explain...would the order not be enough to secure it? Do you have any options you can recommend? PM is its a yes :)
     
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    Paul Kelly ICHYB

    Paul Kelly ICHYB

    Moderator
    • Jan 21, 2008
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    icanhelpyourbusiness.co.uk
  • #6
    Why not look at invoice discounting or similar?
     
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    A

    arcon5

  • #7
    Why not agree smaller payments more often? A tight payment schedule and work schedule will minimise the risk for both parties?

    Is it a case they have no money? Or they are scared of losing more money?
     
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    B

    businessfunding

  • #14
    You may find this is just about talking more with the customer as you are stuck in a vicious circle.

    An order has no value until it is delivered (even if the contract is assignable it would create all sorts of problems

    I'm not aware of any kind of negative LOC (we will pay if we don't deliver)

    Have a chat - see what emerges..
     
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    G

    geester

  • #15
    Looking at the company on creditsafe the company is a dormant company :eek:

    We have tried to chat to them, but they are always in "meetings" and never return calls, this is what the initial contractor told me about just before they went into liquidation!;)
     
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    Walkol

    Walkol

    Free Member
    Sep 14, 2012
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  • #16
    geester said:
    Looking at the company on creditsafe the company is a dormant company :eek:

    We have tried to chat to them, but they are always in "meetings" and never return calls, this is what the initial contractor told me about just before they went into liquidation!;)
    Click to expand...

    With such tight deadlines (as it appears) you don't have much options.

    1) you either accept the risk and get payment upon completion

    2) Agree staged payments - ie a 5 month project, 20% balance at the start of each month

    3) Tell the client to accept your payment terms or you won't do the work


    The fact that you are struggling to discuss this with them does raise alarms bells IMO, and I would be wary of taking option one.
     
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    R

    Root 66 Woodshop

  • #17
    I think realistically you've already answered your own questions.

    1. You're unable to get in touch with them, as they're always in meetings.
    2. The company is actually dormant.
    3. They're wanting your company to fund their project?

    You have your T&C's with regards to contractual work. Stick to them, if this company doesn't like it... sorry but tough... You're a business not a charity.

    Alarm bells should be ringing loudly.
     
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    N

    Neil McLauchlan

    Free Member
    Jun 27, 2013
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  • #18
    Have you thought of going down the insurance route and get a Pre-payment bond. It is the same idea as a Bank guarantee, but you are not tying up any credit facilities with your Bank. The Insurers will want details of financial standing of your company and it could take a few days to sort out, but worth thinking about.
     
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    G

    geester

  • #19
    We certainly will not be taking option 1!:D Favouring to tell them to jog on...:D:D

    Walkol said:
    With such tight deadlines (as it appears) you don't have much options.

    1) you either accept the risk and get payment upon completion

    2) Agree staged payments - ie a 5 month project, 20% balance at the start of each month

    3) Tell the client to accept your payment terms or you won't do the work


    The fact that you are struggling to discuss this with them does raise alarms bells IMO, and I would be wary of taking option one.
    Click to expand...
     
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    G

    geester

  • #20
    Yes, I think I have...the alarm bells are ringing loudly! :eek::D

    Haunted Worlds said:
    I think realistically you've already answered your own questions.

    1. You're unable to get in touch with them, as they're always in meetings.
    2. The company is actually dormant.
    3. They're wanting your company to fund their project?

    You have your T&C's with regards to contractual work. Stick to them, if this company doesn't like it... sorry but tough... You're a business not a charity.

    Alarm bells should be ringing loudly.
    Click to expand...
     
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    G

    geester

  • #21
    Neil,

    Thanks for that, yes I was looking into this however our company has only been trading since Jan 2012! Our accountant is doing our books right now.


    Neil McLauchlan said:
    Have you thought of going down the insurance route and get a Pre-payment bond. It is the same idea as a Bank guarantee, but you are not tying up any credit facilities with your Bank. The Insurers will want details of financial standing of your company and it could take a few days to sort out, but worth thinking about.
    Click to expand...
     
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    Ian J

    Ian J

    Free Member
    Nov 6, 2004
    7,440
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    factoringsolutions.co.uk
  • #28
    [email protected] said:
    Hi

    I would avoid factoring.

    Maybe credit insurance can be used. Euler Hermes offer policies, and can give you insured credit limits. Premiums reflect risks and overall levels of business.
    Click to expand...

    How will that help geester give his customer confidence that his company will fulfil the contract without going bust - which is what he is asking?
     
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    R

    Root 66 Woodshop

  • #33
    Ian J said:
    Shouldn't you be asking them for a bank backed guarantee not the other way round.

    This is a very odd situation and one wonders how a supposed non trading company got the contract in the first place
    Click to expand...

    I was thinking about that last night as it goes!

    My bet is that it was the first company that closed down.

    any takers? ;)
     
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    G

    geester

  • #34
    They have a parent company that is HUGE, I assume that they back everything?

    Anyway, we sent them a credit app form on 2nd July and after putting in 10 calls, no one has returned a single call :( - very unprofessional. So today, I have made the decision, to say a big "thank you, but no thank you...."
     
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    G

    geester

  • #35
    Ian,

    It is for a large construction company in London, well their parent company is HUGE! Possibly use this dormant co should anything go wrong, they can close it without losing much...?



    Ian J said:
    Shouldn't you be asking them for a bank backed guarantee not the other way round.

    This is a very odd situation and one wonders how a supposed non trading company got the contract in the first place
    Click to expand...
     
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    G

    geester

  • #37
    We've tried that and they just seem to ignore our emails, I now have taken a decision to walk away from the project due to their entirely unprofessional attitude - they never respond to voice mails, messages or emails but expect us to drop everything for them.

    You certainly would not expect this behavior from such a high profile company, they probably think everyone owes them something...

    Thanks anyway.

    G
     
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