Building material suppliers in Qatar should consider using letters of credit (L/Cs) or bank guarantees amongst other options to guarantee payment according to lawyers at global law firm Clyde & Co.

They expect rates of non-payment to increase in the Gulf state's construction industry as inflationary pressures continue to work through supply chains.

Indication of creditworthiness

At the earliest stage possible, consideration should be given as to whether it is realistic to request some form of security of payment the lawyers say in an 'Insight'.

"Generally, bank guarantees and L/Cs are considered the most favourable forms of security for the supplier/creditor," they conclude.

"Though paid a fee, banks will only issue a security if the customer i.e. the debtor, is considered credit worthy. Therefore, a debtor's ability to raise a bank guarantee [or an L/C] is an indication of its credit worthiness."

Additional advice

The lawyers warn of the risks involved in payments made using post-dated cheques, including that it is an offence in certain circumstances to make payment with a cheque that is later dishonoured.

Businesses should also identify habitual bad or late payers among their existing client or customer base and take this into consideration during contract negotiation and conduct due diligence on new and potential customers.

Clyde & Co's Insight, Risks of non-payment to suppliers in the Qatari construction industry, can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.