How much is the advance payment? What are the risks of advance payment?

Maturity fund refers to the fund that the external payment of the project is greater than the prepaid expenditure formed by the total amount of accounts receivable or received by the project according to the fund situation of the project.

Risk 1: the risk of prepayment financing.

Part of the funds used by the contractor for advance payment may be self-owned funds, and the other part usually comes from loans. You have to bear the loan interest, and you don't have to bear the overdue penalty interest if it is overdue; Interest and penalty interest itself increase the burden on construction enterprises. If the country's financial policy is greatly adjusted in a certain period of time, for example, the bank loan interest rate is greatly increased, the contractor's bank interest and overdue penalty interest will increase, which will bring greater risks.

Risk 2: Credit risk of materials and equipment.

In the case of early construction, in order to speed up the progress of the construction period, or at least reduce the capital investment without delaying the construction period, the contractor often saves the upfront cost by selling materials and equipment on credit. In this way, not only the quality of purchased materials and equipment is difficult to guarantee, but also the purchase price is different from that when paying cash, and there may even be litigation risk of recovering the purchase cost of materials and equipment.

Risk 3: the risk caused by the owner's intentional default on the project price.

Sometimes, the construction unit itself has enough ability to pay, even in the case that the construction project with capital first has produced benefits (such as some commercial houses have been sold or rented), it refuses to pay the project payment. Because the contractor has paid a huge sum of money in advance, he wants to stop work and collect debts, but he is afraid that the relationship will be frozen, which makes the project payment even more impossible to talk about, thus falling into an embarrassing situation of riding a tiger. In particular, if the construction party fails to recover the project payment after the completion of the construction project, it will face strong pressure from creditors such as banks, material suppliers, equipment suppliers and construction workers. In order to solve the debt problem, the construction unit sometimes has to meet some unreasonable requirements against its will.

Risk 4: Risk caused by poor management of the construction unit.

Even the construction units with good operating conditions will generally consider using funds again for project development, and take the attitude of avoiding and delaying the arrears of project funds as much as possible; If the operation and sales are not smooth, it will refuse to pay, default or deduct the project payment under various excuses, which will bring great risks to the contractor.

Risk 5: Risks caused by labor disputes.

Generally speaking, it is common for a contractor to default on labor fees, and short-term arrears can also be understood and accepted by workers. However, if the contractor cannot pay the labor fee for a long time for various reasons, it is also very realistic to face the risk of shutdown, recovery and litigation.

Risk 6: Risks brought by market changes.

It is a common phenomenon that the contractor is in arrears in the purchase of materials and equipment and in the case of early construction. However, if the market changes greatly in a certain period of time, such as the increase in the procurement cost of materials and equipment or labor wages, it will bring great extra burden to the contractor.

Risk 7: the risk brought by the transfer of construction projects by the construction unit.