Lapasar
Finance & Payments

Advance Payment

Also known as: Down payment, Deposit

An advance payment is money paid to a supplier before goods or services are delivered, often to secure an order or fund initial work.

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Advance payments are used when a supplier needs funds to buy materials, when an order is customised or high-value, or when it is a condition of trade for a new relationship. They give the supplier working capital and commitment from the buyer, but they shift risk to the buyer, who has paid before receiving anything.

Because of that risk, buyers manage advances carefully — keeping them to a reasonable percentage, securing them with a bank guarantee or advance-payment bond, and setting clear delivery obligations in the contract. Advance payments are common in manufacturing, imports and project work, and they are usually deducted from later invoices or milestone payments.

Frequently asked questions

What is an advance payment?
An advance payment is money paid to a supplier before goods or services are delivered, often to secure an order, fund materials or meet a condition of trade.
How is the risk of an advance payment managed?
Buyers limit the advance to a reasonable percentage, secure it with a bank guarantee or advance-payment bond, and set clear delivery obligations and deductions in the contract.

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