Payment terms & Contracts

[MrP]

So.....due to some unfathomably complex legal issues (restrictive covenant related) on the plot of land we are looking to purchase, the only mortgage lender who is willing to even start thinking about possibly considering us happens to be an arrears stage lender - not good when i only have 15% deposit for the land/build.

 

The issue here is basically a cash flow one. I am going to need about £55K to get groundworks complete and timber frame up. I can pay for the groundworks with the cash left out the deposit but the timber frame and windows are the big ones at £40K and £15K respectively. Seemingly as soon as any contractor or supplier gets any whiff of the work self build its seems that payment terms become in full at time of placing order. Munster joinery is a particular example who supposedly apply a 10% discount to their prices which is removed if anything but full payment in advance is offered (basically it seems to be a 10% self build tax). But this seems to be across the board and puts me in a bit of a pickle.

 

So what i guess i am asking in a roundabout manner is how have people fared in their various dealings with contractors and suppliers - Has anyone been in this situation? Have you been able to negotiate for example 30 day payment terms using a contract? How have you been able to creatively make money magically appear to pay suppliers in advance? Is this just a case of juggling credit cards and loans to get me through to timber frame completion (the good lady her indoors will not be pleased!)?

 

Thoughts and ideas gladly welcomed....

[jamiehamy]

When i was looking at windows, I paid close attention to the payment terms - many were around 25% deposit and, 65% on delivery and the remaining 10% when fitted. 

 

I was always brought up never to pay fully in advance and thank goodness I stuck to my guns - 5 months later the issues are far from resolved. In this instance, the window company didn't have the option to pay by card so the 15% deposit was not protected per se. If we had paid the remaining 13k or so on delivery, we probably have ended up in court. 

 

It's a bit of give and take - I get the other side but ultimately, the risk has to be shared but I would never pay for something upfront ever. 

[ProDave]

My windows (Rationel) were 50% deposit and remaining 50% BEFORE delivery, so that won't help you.

 

I did have a rather unsually favourable deal with the builders of stage payments in arrears, so they had started work and bought materials before they even got their first payment from me. That was not from a timber frame company, but a local small firm of builders who built and erected the frame, as well as laying the foundations.
 

[warby]

You may be able to find a credit card company offering zero interest on balance transfers from other cards and/or giving zero interest for a fixed period; this might help your cashflow.

Do not forget the consumer protection you get with a £100 deposit using a credit card. 

A short term Bank loan can be cheap or Bank bridging loans can be expensive; but both would work. 

[jamiehamy]

I found a credit card that did money transfers (Barclaycard) at only 2.9% and no interest for 18months. That's come in useful a few times,  esp since I got the credit limit at 22k! Much cheaper than any loan and very helpful for short term funding.  

[MrP]

Wow, 22k! You must have built up a good line of credit over the years. To be honest i think that is going to be my only option, a mix of loans, cards and general begging. What really gets me is a contractor i used to work for went to 60 day payments on all suppliers, and they had shed loads of cash sitting in the bank! That's the way of the world though i guess.

[joe90]

Trouble is money in the bank does not earn you anything nowadays.

[PeterW]

6 minutes ago, joe90 said:

Trouble is money in the bank does not earn you anything nowadays.

 

Potentially it does - a lot of businesses it can be offsetting loans and short term borrowing so whilst not earning interest, you're not being charged interest ...