We are currently increasingly noticing that many companies in Germany are demanding advance payments for their goods and services. Entrepreneurs often go into high financial outlay (working time, materials, etc.). Therefore, they use the possibilities to reduce the financial risk by advance payments or deductions. In times of a corona pandemic it is therefore not surprising that companies are increasingly trying to avoid their liquidity bottlenecks by requiring advance payments. In addition to the instrument of credit insurance, prepayments are a practicable way of doing this. However, there are a few details to keep in mind.
Check solvency in advance
If you are required to make advance payments, you should first check the solvency of your contractual partner. If you as an entrepreneur want to take more advances with immediate effect, you should ensure that the advance payments are legally compliant.
Individually agree on advance payments
In order to make advance payments legally effective, they should always be negotiated individually. If you are obliged to make advance payments, you should think about securing the amounts paid. There are numerous possibilities available.
Examples for the hedging of advance payments are agreements
- of installments,
- of (advance payment) guarantees,
- a reservation of title and
- of liens.
We would be happy to advise you on the measures suitable for your project and how to successfully integrate them into your contract. We will check for you which legal instrument is suitable for your project and implement it for you with legal certainty. Do not hesitate to contact us should you have any questions.