Table of Contents

• Introduction
• The 7-Step Client Due Diligence
• Warning Signs Of Non‑Payment
• Bank Guarantee For Renovation
• Credit Insurance For Small Builders
• Escrow Account For Home Projects
• Frequently Asked Questions
• Conclusion

Introduction

Getting paid on time decides whether a small building firm grows or grinds to a halt. This guide shows what to check before you sign, why the checks matter (cash protection, fewer disputes), and how to set up payment security that clients accept. You’ll get a practical process, real examples from France, Italy, and Spain, and tools you can put to work today.

Current context: over eight in ten European businesses say late payment hurts growth (Intrum, 2024). The EU’s proposed Late Payment Regulation (as of Sept 2025, still under negotiation) aims to standardize 30‑day terms—good news, but you can’t wait for laws to save your next job. Protect yourself now.

The 7-Step Client Due Diligence

Follow this simple sequence before you send a final proposal or mobilize:

1. Identify Decision Maker And Payer

• Confirm who signs, who pays, and where funds come from (savings, bank loan, insurance payout).
• Ask for the bank’s loan approval letter if financed.

2. Verify Scope Readiness

• Final drawings, selections, and access constraints reduce budget drift.
• A defined scope makes staged payment milestones objective.

3. Proof Of Funds

• Private savings: a redacted bank statement or letter from their bank manager confirming available balance.
• Loan: lender’s written confirmation of approved amount and disbursement schedule.

4. Payment Calendar Draft

• Split the price into logical triggers (e.g., deposit to order materials, after demolition, after rough‑in, before finishes, at practical completion, at final handover).
• Tie every trigger to a measurable on‑site event or documented deliverable.

5. Security Option Selection

• Choose one or two protections: deposit with material receipts, guarantee, escrow, or insurance (see comparison table below).

6. Contract Pack

• Include scope, drawings, timeline assumptions, access constraints, inclusions/exclusions, and your payment calendar.
• Add change mechanism, dispute path (mediation), and interest for late payment allowed by local law.

7. Kickoff Checklist

• Confirm start date, site access, waste removal plan, and insurance certificates.
• Get the first payment cleared before ordering long‑lead materials.

Quick win: ask the client to countersign the payment calendar as a separate page. It’s the page people reference when stress rises.

Pro tip: centralize the paperwork so nothing gets “lost in WhatsApp.” Tools like Donizo keep your client file, approvals, invoices, and payment status in one place—clean records help you win disputes and keep cash moving.

Warning Signs Of Non‑Payment

You don’t need a crystal ball—just patterns to watch.

• Vague Funding Answers “We’ll sort it when we get there.” Ask for written proof. No proof, no start.

• Extreme Price Focus Endless bargaining on a modest quote often leads to late‑stage friction. Hold your line and strengthen scope clarity.

• Refusing A Deposit A small, fair first transfer before materials is normal across FR/IT/ES. A flat “no” suggests risk.

• Overcomplicated Decision Chain If three family members must sign, expect delays. Add extra time and micro‑milestones to keep momentum.

• History Of Contractor Disputes If a prospect trashes three previous builders, assume you’re next. Tighten documentation or walk away.

• Loan Not Final An in‑principle bank email isn’t cash. Wait for full approval and understand drawdown rules.

What to do if you see two or more signals:

• Shorten milestones; invoice little and often.
• Ring‑fence high‑ticket items (custom windows, HVAC) with a dedicated prepayment.
• Add a security instrument (see below) or decline the project.

Bank Guarantee For Renovation

How it works

• A bank issues a guarantee (FR: caution bancaire; IT: fideiussione bancaria; ES: aval bancario) that pays you if the client defaults under defined conditions.

When it fits

• Jobs over €25k where the client has assets and a good bank relationship.
• Projects with costly special orders (windows, bespoke joinery) that you can’t resell easily.

Typical cost and admin

• Annual fee often 1–3% of the guaranteed amount; banks may require collateral.
• Define clear calling conditions in the contract (“X% unpaid beyond Y days after certified milestone”).

Country notes

• France: banks and some insurers provide guarantees; clear triggers reduce disputes.
• Italy: bank or insurer guarantees are common on private works over certain sizes.
• Spain: aval terms vary by bank; clients may need a tied deposit.

Practical setup

• Keep guarantee amount aligned to your exposure (e.g., value of the next two milestones + long‑lead materials).
• Set expiry a few weeks after planned handover to cover final payments.

Credit Insurance For Small Builders

How it works

• An insurer covers part of your loss if the client doesn’t pay. For private homeowners, availability depends on provider and documentation quality.

When it fits

• Larger residential jobs or repeat work with developers or landlords.
• You want external credit vetting plus partial indemnity.

Typical cost and limits

• Premiums vary by risk; minimum annual premiums may apply.
• Coverage often excludes disputes unrelated to insolvency—keep paperwork tight.

Implementation tips

• Engage a broker early to check homeowner eligibility.
• Share your payment calendar and verification steps; insurers like structured processes.

What it does for you

• Independent risk opinion before you commit.
• Safety net that, combined with staged billing, keeps a bad outcome survivable.

Escrow Account For Home Projects

How it works

• Funds are deposited with a neutral third party and released as milestones are certified.

When it fits

• Clients wary of deposits but willing to pre‑fund with oversight.
• Projects with defined stages and measurable outputs.

Costs and mechanics

• Bank or notary fees; often a flat setup plus small per‑release fee.
• Agree who certifies milestones (you + client, or an architect/engineer).

Country notes

• France: notaries can hold funds; private escrow services exist.
• Italy: notary or bank escrow is familiar in property transactions and can be adapted.
• Spain: escrow (“cuenta de depósito”) via banks/fintechs is increasingly accessible.

Practical setup

• Keep releases simple: 5–6 stages max.
• Link each release to dated site photos and a short sign‑off note stored in your project hub.

Mid‑project friction drops dramatically when money is already parked and rules are agreed. This is where a digital record helps. With Donizo, you can attach milestone photos, client sign‑offs, and invoices in one thread, so the escrow release is a formality, not a fight.

Payment Security Options At A Glance

Frequently Asked Questions

What documents should I request before I start?

Ask for proof of funds (bank letter or loan approval), ID of the legal payer, signed scope and payment calendar, and confirmation of access dates. For big custom items, add a separate prepayment agreement and supplier proforma.

How big should the first payment be?

Match it to your real exposure: booking the team, ordering materials, and mobilization. On many residential jobs this sits around 10–30%—enough to cover early costs without overburdening the client. Always tie it to a deliverable and a date.

Can I pause work if a milestone isn’t paid?

Yes—include a clearly worded right to suspend after a defined grace period. Keep site notes, photos, and delivery receipts. Communicate in writing, stay polite, and give a short window to cure before demobilizing.

Are late‑payment interest clauses enforceable?

Generally yes, within legal limits. The EU is moving toward stricter rules on payment timing; check your country’s consumer protections and include a fair, transparent rate in your contract. Documentation quality is key to enforceability.

What if the client refuses all security options?

Reduce scope to what they can pre‑fund, split the job into micro‑projects with separate contracts, or walk away. High resistance plus vague funding usually predicts friction later.

Conclusion

You can’t eliminate risk, but you can make it manageable. Screen the payer, confirm money sources, align a clear payment calendar, and add the right security tool for the job size. Keep documentation tight and decisions centralized so you have evidence when timing matters.

If you want an easier path: set up your milestones, attach site photos, and track every invoice and receipt in one place. That’s exactly what Donizo was built for—saving you 5–10 hours a week while protecting margins and keeping client relationships clear. Make your next project the one that runs calm, clean, and fully paid.