Whether to Get a Deposit from a Builder Customer

Five out of five cabinetmakers agree — no deposit, no work delivered (with rare exceptions). March 1, 2006

How many of you all ask for deposit or draws from home builders before starting work? The reason I’m asking is because one of my new builders that I have just completed one house for and willing gave us a deposit and now its all of the sudden there is a problem with this.

Forum Responses
(Cabinetmaking Forum)
From contributor R:
I don't work for any contractor that can't give me 50% as a deposit. I will not finance the job for them. I get 25% at delivery, 15% after granite install (I sub it out) and 10 % when completed. If they don't like that I don't work for them. And I think if they don't like that they want to use you up and spit you out.

From contributor C:
Contractors are always trying to get subs to finance their projects for them, it is in their nature to do this. If he is a steady and reliable client for you, you might consider it. But on only the second job with this fellow, he's not there yet. I sometimes extend a no-deposit offering to my best customers, but I never will if they demand it. I'd be very wary of this guy.

From contributor B:
All jobs should have a 50% deposit regardless of who they are. If there is a failure of payment for any reason, it's your company and survival on the line.

From contributor H:
As one previous poster has said I do for my best and time proven clients start a job without a deposit, and for all others - no deposit and no order? Banks do not produce stairs and millwork as their product. We do not produce loans as our. It’s that simple. Whenever you give anyone your product, even with credit terms, you are loaning them money. The money you spent on material and the money you earned as labor.

Do not work for this contractor unless he deposits. If he will not give half then get 1/3. But do not deliver the finished product until you get the 2nd 1/3. Leave off or out critical parts of the job until you get final payment.

And whatever you do not sign a waiver of lean for the project until you have been paid in full. He and or the bank will not like this stance by you. On more than one occasion banks have paid me directly. Bypassing the contractor to assure their investment is secure and complete.

From contributor M:
I am with the rest. Get 50% up front. Depending on how well you know the contractor, I would deliver and install once I get the other 50%.

From contributor B:
For my best customer/builder, I just do about 25%, then invoice for draws for about 15-20% throughout the job. I do this mostly because they're very custom, meaning changes/additions are being made as we progress. This way our cash flow is there. Plus, the builder and I both have a series of detailed invoices that make it easy to track costs and determine exactly which part of the job put us over/under budget. For smaller jobs such as spec. homes its 50% deposit, 40% upon delivery, 10% upon "substantial completion".

From contributor K:
I've never heard of anyone ever starting a job without a deposit of some sort. Who pays for the materials without it – you do. I get a deposit of 1/3 or so depending on the size of the job and then require progress payments throughout the job (every ten days) and then the final payment upon completion. Unless you have some expendable bank, always ask for a deposit. Otherwise I would think that you are taking it out of the profit from the last job. And what if a machine such as the table saw goes down? The money you spent on materials could have gone to that instead.