Why payment is the hard part of a first deal
Two strangers, often in different countries, are asked to go first. You are asked to wire five or six figures to a company you have never met; the seller is asked to release stock to a buyer who could disappear. Neither side is being unreasonable — both are carrying a real risk, and in beverages the sums are large enough that one bad deal ends a trading year.
Escrow removes the question of who goes first. A neutral third party holds the money while the goods move, and releases it when the agreed condition is met.
What escrow actually is
An escrow agent is a regulated third party — a specialist escrow service, a solicitor's client account, or a bank offering an escrow product — that takes your payment, confirms it has it, and holds it outside both parties' control.
The seller ships knowing the money exists. You pay knowing it will not be released until the condition you agreed to is satisfied. The escrow agent is not a judge of quality and not an insurer: it is a stakeholder that follows the instructions both sides signed at the start.
How an escrowed beverage deal runs
- Agree the terms first. Product, spec, pack, quantity, price, Incoterm, duty status (T1 or T2), and — the part people skip — exactly what triggers release. Collection from the warehouse? A clean bill of lading? Buyer's inspection at destination?
- Open the escrow. Both sides sign the same instruction with the escrow agent. The agent's fee and who carries it are settled here, not later.
- Buyer funds the account. The escrow agent confirms cleared funds to both sides. Nothing has moved yet, and nothing is at risk yet.
- Seller releases the goods. Allocation, loading, and documents — invoice, packing list, and the transport document your Incoterm calls for.
- The trigger is met and evidenced. The document or inspection you named in step 1 is presented to the escrow agent.
- Funds are released. The agent pays the seller. If the trigger is not met within the agreed window, the funds return to the buyer.
The whole point is step 1. An escrow with a vague release condition is a dispute waiting to happen — it just moves the argument from "where is my money" to "was the condition met".
What it costs
Escrow is priced as a small percentage of the deal, and it falls as the deal grows: on a pallet-sized order it is usually well under 1% of the value, with a flat minimum that makes very small orders uneconomic. Compare that to the two costs it removes — the discount a nervous buyer asks for to go first, and the deal that never happens at all.
Who pays is negotiable. Split 50/50 is the common convention on a first deal, on the reasoning that both sides get the protection.
What escrow protects you against
- Non-delivery. Money paid, goods never shipped. This is the risk escrow is built for, and it removes it almost entirely.
- A seller who cannot actually supply. The stock has to move before anyone gets paid, so an offer that does not exist never reaches the funding stage.
- Disappearing counterparties. Both sides are identified and verified by the escrow agent before a cent moves.
What escrow does not protect you against
This matters more than the list above, because assuming otherwise is how buyers get hurt:
- Authenticity and provenance. Escrow confirms that goods shipped, not that they are genuine. Ask for pedigree documentation and buy from a counterparty who will provide it.
- Wrong spec. If your release trigger is "goods collected", a pallet of the wrong pack size still gets paid for. If spec matters, make inspection before release the trigger.
- Damage in transit. That is what cargo insurance and your Incoterm are for. Escrow has no view on condition.
- Duty and clearance problems. T1 goods released to a buyer without the right licence are still your compliance problem. See our guide on T1 vs T2 duty status: https://akay.ie/guides/t1-vs-t2-duty-status/
- A bad price. Escrow makes a deal safe, not good. Price the list first.
Escrow versus the alternatives
Bank transfer in advance
Cheapest and fastest, and the buyer carries all of the risk. Fine with a counterparty you have traded with for years. On a first deal with a new supplier it is simply a bet.
50% deposit, 50% on shipment
The wholesale default, including ours. It splits the exposure rather than removing it: the buyer risks the deposit, the seller risks the balance. Sensible once a relationship exists, and quick to arrange.
Letter of credit
The bank-grade instrument for large international deals, and genuinely strong protection — but it is a documents game. It costs several hundred euro in bank charges before anything moves, takes a week or more to issue, and a discrepancy as small as a misspelled product name can hold payment for weeks. Worth it at container scale; heavy for a €40,000 order.
Escrow
Sits between the two: most of the protection of a letter of credit, at a fraction of the cost and set-up time, and without the documentary hair-splitting. The trade-off is that an escrow agent is not a bank — choose one that is regulated and that both sides can verify.
A worked example
A buyer takes a mixed pallet of branded spirits at €48,000, EXW, T1, from a supplier they have not traded with before.
- Advance transfer: the buyer carries €48,000 of risk for the several days between payment and collection, on trust alone.
- 50/50: the buyer risks a €24,000 deposit; the seller risks €24,000 of released stock.
- Letter of credit: strong protection, but several hundred euro in bank fees and a week of paperwork before the pallet moves — on a single pallet, the cost and delay are out of proportion.
- Escrow with "release on collection of goods": the buyer funds €48,000, the seller allocates and loads knowing the money is there, and the funds release when the goods are collected. Cost: a few hundred euro, typically split. Exposure on both sides for the days that matter: effectively nil.
Change one thing — make the trigger inspection at the bonded warehouse before release — and the buyer also covers the wrong-spec risk, at no extra cost beyond the inspection itself.
Escrow with AKAY
We hold over €50 million of branded spirits in a single location and ship worldwide, and a good share of our buyers are placing a first order with us. Escrow is available on request, and we would rather set one up than lose a deal to a payment stand-off.
Our standard terms remain 50% deposit and 50% on shipment, which most repeat buyers use. For a first deal, a large order, or a new jurisdiction, ask for escrow when you ask for the price — not after the pro-forma is issued. We will confirm the agent, the fee, who carries it, and the release trigger in writing before anything is committed.
Ask before you agree terms
Payment terms are part of the price. Settle them at quotation, alongside the Incoterm and the duty status, and neither side has an uncomfortable conversation later.
Price your list first at https://quote.akay.ie — upload it in any format and it comes back with our price on every line — then ask about terms on the lines you want.
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