Furnace

No one likes credit risk, unless they're being paid a fair price for it. The current situation benefits only the suppliers. I lend money to plenty of companies, but at a rate I think is fair for the adopted risk. Many forum members do this too via savings and pensions etc. It feels uncomfortable to lend money to a supplier via paying prior to receipt of goods - I'm providing their working capital for free and have no recourse (other than being an unsecured general creditor) if they run into difficulties. I'm happy to self-insure when buying a £10 book on Gumtree, not when stumping up £200k. I'd be happy to pay a modest premium to mitigate the exposure, I'm just not sure 6% for 6 months' cover is 'fair'.

The requirement for collateral is because there is a real risk of loss, and that is the business banks are in. I'm wanting to build a house, not lend money to a housebuilder.

Hence I think escrow is a good idea, and fair Business to business trade is exposed to this all the time, and often deal with it via standardised trade finance/letters of credit. We are in the twilight world of business-to-customer, but with the amounts of money in line with business-to-business.

That sounds high. Probably covers a large portion of the materials, yet no materials are needed at that stage. Companies go bust 'unexpectedly' all the time. I don't have the information to know which one it will be, and I'm not (any longer) in the business of betting on creditworthiness. The amount of money at risk is enough that I wouldn't pay upfront without mitigation in place, and that's not because I don't think MBC is a good company. It probably is, but I don't want to take the risk.

I spoke at reasonable length with a finance chap at MBC. They claim to have a lot of free cash (more than end-2021) so don't need the stage payments for working capital. I've no reason not to believe this. However, the owner is very conservative and doesn't wish to restrict himself if times become difficult and therefore is not willing to consider escrow or a bank-backed letter of credit that might affect his access to cash or funding. The offer of an insurer-backed facility is available since it doesn't affect his potential funding routes, but I think it's pricey (although not an 'insane level' @Nickfromwales) I can't think of another area of my life where I have, or would, consider exposing myself to another's creditworthiness for >£100k+. In personal transactions at these levels, I've bought and sold houses and cars over the years, and have only used "cash on delivery" or a conveyancer to remove credit risk. Unexpected things do happen. Which is why I use a credit card to pay for (almost) everything. I've only ever needed to claim on Section 75 once for a few hundred quid, but it's a nice comfort to have, and free. A 6% surcharge to remove credit risk with MBC seems expensive when making all payments into escrow would likely be cheaper and fairly straightforward. Here's a strawman. Stage 1 payment to cover plans for fabrication (10%) - released when drawings and structural calcs are completed and delivered. then Stage 2 payment made to cover cost of frame and delivery to site (40%) - released when frame is delivered to site. then Stage 3 payment made to cover erection (40%) - released when completed. then Stage 4 payment made to cover return to site after windows/doors fitted for blower test (10%) - released when test passed. Not too onerous on admin. and not unreasonable?

Indeed. As with all insurance, you'd prefer not to need to claim. But in the situation where it all goes horribly wrong, the premium paid and inconvenience of starting again seems small beer.

The risk premium is not an interest rate - it's only for the 'risk' not general cost of borrowing. I'd be more likely to pay £5k, than the c.£12k suggested by MBC. However, in the scheme of the whole project's budget, I'm not sure I should consider £12k as a deal breaker if I get surety of build with a respected company.

I'd not heard of them. Escrow can only be used if both parties agree, which is where I have a problem with MBC.

I have heard very good things about him and his company.

Kudos for that great air tightness result👍 There are undoubtedly many ways to achieve a quality result, but engaged, competent and motivated workers appears critical almost regardless of build system. Cheers

Thanks @IanR for that clarification. I appreciate the build time for an MBC-style is faster, but I'm drawn to Adam's offering due to the lack of credit exposure, reduced transportation costs/emissions, plus his undoubted experience in executing.

Deffo!

Gotcha. Thanks

In what way Nick? AFAIK Adam uses Cullen (or Cullen style) kits and his wealth of experience to achieve his exemplary results. Are these results readily achievable by on site cutting by those not experienced in PH? I'm a newbie here, so keen to learn from others before I spend money discovering it the hard way?

I chatted to him a couple of weeks ago, and was very taken with his approach and integrity. They don't take on too much work in order to ensure high standards can be achieved. He remembers your build.