General contractor down payment question

[Ben C.]

Hello, My GC is asking for a 35% deposit on a 200k job. What are your thoughts? I see things from both sides as an investor. I know some investors expect contractors to front loads of money for jobs but I don't. A deposit sounds like a fair thing to me in order for contractor to start setting up the job. What are your thoughts? I have received a copy of his license and insurance and called multiple references he has provided.

[Don Petrasek]

have you thought about offering to pay for materials directly instead and then working out a draw schedule that is timed to quickly cover payments to subs and any payroll he has?That's what upfront $ should be covering - and by the way I agree with your view that contractors shouldn't really be expected to front large sums of $.

  You're probably OK based on the due diligence you've done but fronting $70k to any contractor- even one that I've worked with a lot would make me a bit nervous.  Not so much because of the risk of losing the $ - more so because you've lost your leverage to get the GC moving and keep the early stages of the project in motion.   If I'm him and have to choose between getting your project started with $70k in my pocket already and going to the other that's 3-4 days of work away from getting my next payment, guess where I'm going tomorrow?