Construction Financial Glossary

Deferred Payment Schedule Definition

A deferred payment schedule is a financing arrangement in which payments for construction work are delayed and spread over a set period rather than being due immediately upon completion.

Why Use a Deferred Payment Schedule?

    1. Helps owners manage cash flow by deferring large expenses.
    2. Enables contractors to secure contracts with flexible payment terms.
    3. Can be beneficial when financing is structured around project milestones.

Potential Risks

    1. Contractors may experience delayed cash flow, affecting their ability to pay subcontractors and suppliers.
    2. Interest or fees may apply, increasing overall project costs.


Related Terms: Pay-When-Paid Clause, Retainage, Construction Loans, Progress Payments

FAQs

How does a deferred payment schedule impact contractors?

A: It can create cash flow challenges, so contractors should carefully negotiate terms to ensure they can cover their costs.

Are deferred payment schedules common in construction?

A: Yes, especially for large-scale projects where owners need to manage financial resources over time.

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