Supplier Deposits: How Much to Pay, How to Protect Yourself, and What to Do If Things Go Wrong
A supplier sends you a quote, you sign it, and they ask for a 50% deposit before starting work. You wire the money. Two months later, nothing has been delivered, the supplier has gone quiet, and you discover the company was dissolved last week.
This is not a rare scenario. The deposit is the highest-risk moment in any procurement: it is the only point where money changes hands with nothing delivered in return. Most supplier disputes, and nearly all supplier fraud, revolve around this moment.
This guide gives you the framework: how much is normal, what protects you, what red flags to spot before wiring anything, and what to do if the supplier fails to deliver.
How much deposit is normal?
The answer depends on the industry, the type of work, and your relationship with the supplier.
Construction and trades. In B2B construction, deposits of 20% to 40% are standard practice. The deposit covers material procurement and site mobilisation. Beyond 40% on a first-time order, ask questions. Consumer protection laws in many jurisdictions cap deposits for residential work (often at 25-33%), but these caps typically do not apply to business-to-business transactions.
Custom manufacturing. For goods made to your specification (tooling, machined parts, bespoke equipment), 30% to 50% is common. The supplier commits production resources as soon as the order is placed. The reasonable counterpart: a payment schedule tied to verifiable milestones (design approval, factory inspection, shipment).
Standard supplies. For off-the-shelf products (consumables, standard materials, office supplies), a deposit is generally not justified. The supplier has stock, they deliver, you pay on receipt or at net 30. If a supplier demands 50% upfront for catalogue items, that is a signal.
Services. Practice varies. A 30% deposit at engagement is common for long-running projects (consulting, software development, audits). For one-off services (a single repair, a translation), payment after completion is the norm.
International trade. Cross-border purchases often follow a 30/70 split (30% at order, 70% before shipment or on delivery). For significant amounts, a letter of credit replaces the deposit by providing a bank guarantee to both parties.
What the law protects
B2C (consumer purchases). Most jurisdictions regulate consumer deposits. In the EU, consumer protection directives give buyers the right to a full refund if goods are not delivered within the agreed timeframe. In the US, the FTC's Mail Order Rule requires delivery within the stated period or a refund. In the UK, the Consumer Rights Act 2015 provides similar protections. These rules apply when you buy as an individual, not as a business.
B2B (business purchases). Protection is contractual, not statutory. There is no legal cap on supplier deposits in most B2B contexts. Everything depends on your contract. If the signed quote specifies a 50% deposit and you signed it, you are bound. Your leverage is in the negotiation before signing, not after.
What this means in practice. In B2B, your protection rests on three things: what your contract says, the financial solidity of the supplier, and your ability to verify both before you pay.
5 red flags before wiring a deposit
1. The supplier has been in business for less than a year
A company incorporated three months ago offering you an $80,000 quote has no track record, no verifiable references, and probably no published accounts. Not disqualifying on its own, but it warrants deeper due diligence.
2. No business registration details provided
Every legitimate business has a registration number (Companies House number in the UK, EIN or state filing in the US, SIRET in France, KvK in the Netherlands). If it is not on the quote, ask for it. If they cannot provide one, stop. Verify the number against the official registry. A dissolved or struck-off company is an immediate red flag.
3. The bank account is in an unexpected country
A local plumber who provides a Lithuanian IBAN is abnormal. International wire transfers to third countries are a classic vector for supplier fraud. If the supplier has a legitimate reason (subsidiary, multi-currency account), they should be able to explain and document it.
4. The deposit exceeds 50% on a first order
A deposit above 50%, on a first order, with no track record, no milestone payments, and no refund guarantee: this is the profile of a dispute waiting to happen. Negotiate a staged payment schedule or request a bank guarantee for deposit refund.
5. Artificial urgency
"The price is locked until Friday" or "we only have 3 slots left this month." These pressure tactics are as old as commerce. A serious supplier gives you time to verify. If you are being pushed to pay within the hour, slow down.
5-minute anti-fraud checklist
Before wiring a deposit, run these five checks. None takes more than a minute.
Business registration. Verify the company is active and not dissolved. In the UK, search Companies House. In the US, check the state Secretary of State database. In the EU, use the VIES VAT validation service for a quick cross-border check. For French suppliers specifically, Quotal Vérif queries the official SIRENE registry in one click.
Age of the business. Check the incorporation date. Less than 12 months means heightened vigilance. Not a disqualifier on its own, but combined with other signals, it is significant.
Registered address. Does the address correspond to a credible location? A serviced office or co-working space is fine. A vacant lot on Google Maps is not.
Bank account country. Does the IBAN or account country match the company's registered country? If not, request a written explanation before paying.
Reputation and references. Search the company name plus "scam" or "review." Check for hidden fees in the quote that might indicate a pattern. Ask for two recent client references and call them.
What to do if the supplier doesn't deliver after the deposit
Step 1: formal demand. Send a written demand (recorded delivery or equivalent) setting a reasonable delivery deadline (15 business days is standard). Reference the signed quote, the deposit amount, the wire date, and request either delivery or a full refund.
Step 2: report. If the supplier does not respond, report the situation to the relevant authority. In the UK, this is Trading Standards or Action Fraud. In the US, the FTC and your state Attorney General. In the EU, consumer and competition authorities handle B2C cases; for B2B, you are in commercial dispute territory. In parallel, check the company's status on the official registry for any insolvency proceedings.
Step 3: legal action. For small amounts, small claims court (up to $10,000 in most US states, up to £10,000 in England and Wales) does not require a lawyer. For larger amounts, commercial litigation applies. If the supplier is clearly fraudulent (shell company, fake quotes), file a police report.
Step 4: insurance and bank. Some professional insurance policies cover unrecovered deposits (check your policy). If you paid by credit card, a chargeback may be possible. For wire transfers, recovery is significantly harder once funds have been transferred.
FAQ
What's the difference between a deposit, a down payment, and a retainer?
A deposit is a partial payment against a future delivery, typically refundable if the supplier fails to perform. A down payment is functionally the same, though the term implies a larger percentage of the total. A retainer is a fee paid to secure availability (common with lawyers, consultants, and agencies), often non-refundable. In practice, the terms are used loosely. What matters is what your contract says about refund conditions, not what the payment is called.
Is VAT / sales tax due on a deposit?
In most jurisdictions, yes. A deposit is a taxable event at the time of payment. The supplier should issue a deposit invoice showing the applicable tax. You can typically reclaim the tax in the same period, provided you have the invoice. Rules vary by country, so check with your accountant for cross-border transactions.
Can I refuse to pay a deposit?
In B2B, you can negotiate. Nothing requires you to pay a deposit unless your contract says so. If the supplier insists and you prefer not to pay upfront, propose alternatives: payment on delivery, a letter of credit, or a bank guarantee. If the supplier refuses all alternatives, weigh the risk carefully.
I signed a quote that says '50% deposit at order.' Am I locked in?
Yes. By signing the quote, you accepted the terms, deposit included. Refusing to pay the deposit after signing is a breach of contract. Negotiate the deposit amount before you sign, not after.
How do I verify a supplier before paying?
Start with their business registration number. Verify it against the official registry in their country of incorporation. Check the company's age, registered address, and activity status. For French suppliers, the SIRET, NAF, and KBIS verification guide walks through the process step by step. For suppliers in other countries, OpenCorporates and D&B (Dun & Bradstreet) offer cross-border business checks.
Related reading:
- 7 Hidden Fees Lurking in Your Vendor Quotes
- How to Compare Supplier Quotes: The Complete Guide
- How to Verify a French Supplier: SIRET, NAF, KBIS
Before you wire a deposit, know who you are dealing with. Quotal Vérif checks French suppliers against official registries in seconds. And Quotal Achats compares your quotes line by line so the price is clear before money changes hands.