Note
Stage Payment by Promissory Note
Most Thai subcontract agreements carry a payment clause near the back that reads something like this: “payment by bill of exchange with a maturity of 60 days from the billing date.” Many contractors sign and move on without counting what that clause costs them in cash flow.
A promissory note, known in practice as a PN, is a written instrument the main contractor issues that promises to pay a fixed amount on a future date. It is not cash. The gap between the billing date and the maturity date is the cash-flow hole your business has to bridge.
Why Promissory Notes Are Common in Thai Construction
Main contractors in Thailand manage their own cash position by negotiating credit terms from their clients and passing a longer version of those terms down to subcontractors. When an owner pays the main contractor on a 45-day credit cycle, the main contractor attempts to give subcontractors 60 or 90 days instead.
The preferred instrument is the promissory note because it has a clear legal standing under the Thai Civil and Commercial Code. That makes it more reliable than a verbal promise, but it still means your cash arrives well after your invoice is issued.
For a subcontractor who has already paid workers, purchased materials, and completed the stage, the delay is not theoretical.
What a Promissory Note Clause Actually Says
PN clauses are usually tucked into the payment section of the subcontract and worded in a way that sounds routine:
“ผู้ว่าจ้างจะชำระค่าจ้างโดยการออกตั๋วสัญญาใช้เงินมีอายุ 60 วัน นับจากวันที่ผู้รับจ้างวางบิล”
Translation: “The employer shall pay by promissory note with a maturity of 60 days from the billing date.”
Before you sign, count the actual payment window. If your billing cycle closes on day 30 of the month, the PN matures on day 90. If the main contractor disputes a stage and delays acceptance by two weeks, the clock starts from the revised billing date and pushes maturity to day 104 or beyond.
The clause also determines what options you have if you need cash before maturity. A PN can be discounted at a bank or factoring company, but the discount fee comes directly off your margin. Knowing the maturity date before the work starts lets you decide whether to price that cost in, rather than discovering it after the stage is complete.
How Long Does the Maturity Period Run in Practice?
Promissory note maturities in Thai subcontracts commonly fall into three ranges:
30 days: Found in contracts with well-capitalised main contractors or publicly listed companies. Still a delay, but manageable within most cash flow plans.
60 days: The most common term. A stage billed in month one arrives as cash in month three. A contractor running three projects simultaneously may have stages from all three in different maturity windows at the same time.
90 days or beyond: Common in projects where the main contractor is waiting on an owner or a government client. At this range, a subcontractor needs to track exactly which projects are in which payment phase and plan labour and material spending accordingly.
The maturity period is usually negotiable before signing, not after. Once work has started, a request to revise payment terms rarely succeeds.
What to Check Before You Sign
A concrete example: a metalwork subcontractor is reviewing a subcontract for fit-out work across 12 zones in a commercial building. The payment clause specifies a PN at 60 days. The stage schedule has six billing stages spread over eight months. The subcontractor maps the cash cycle: the stage billed in month two becomes cash in month four, the stage in month four becomes cash in month six, and the final stage billed in month eight becomes cash two months after practical completion. This is the cash plan before the work starts, not a surprise after.
Four things to verify before signing any contract with a PN clause:
- What is the maturity period? Count from the billing date to the maturity date. If the wording is ambiguous, ask for written clarification before signing.
- Can the PN be transferred to a third party? Most PNs are transferable under Thai law. Know who will actually make the payment when the date arrives.
- What happens if the PN is dishonoured? A contract with an LAD clause for late payment does not automatically cover a bounced PN. Check whether the contract addresses this separately.
- What is the main contractor’s payment track record? A PN is a legal obligation, but enforcement takes time and money. Ask other subcontractors who have worked with this main contractor before.
Why the BUILD 30 Guarantee Is Written Around Billing, Not Cash
Stage billing and cash receipt are two different events. On a project with 60-day PN terms, they are at least two months apart.
The guarantee in this programme is built around invoices being issued, not cash arriving in a bank account. Whether and when the PN is paid depends on the main contractor’s liquidity and credit position, which is outside the control of anyone except the main contractor. A guarantee about cash in the bank would be a guarantee about something no one running this programme has the power to deliver.
This is the same distinction to watch inside your own subcontract. When a main contractor says “we will pay your stage once we receive the owner’s certification,” that is a pay-when-paid condition, not a commitment to pay on a fixed date. The two may lead to the same payment eventually, but they carry different risks when the owner’s certification is late.
What can I do if I need cash before the PN matures?
A promissory note is a negotiable instrument. You can discount it at a bank or a factoring company: you receive cash now in exchange for a fee, and the financial institution collects the full amount at maturity. The fee depends on the maturity period and current market rates. If you know in advance that you will need the liquidity, price the discounting cost into the job before you sign, not after the stage is complete.
Can I refuse a PN and insist on bank transfer?
This is a commercial negotiation. Before signing, yes. After work has started, it is significantly harder. Some main contractors will accept a bank transfer with a shorter credit period in exchange for a small price reduction. Others will not move at all. Your leverage is highest before the contract is signed and before mobilisation money has changed hands.
Does a dishonoured promissory note end the contract?
A dishonoured PN is a breach of the payment obligation, not automatically a termination event. Your options are to negotiate a replacement PN, pursue a civil claim, or check whether the contract includes an explicit termination clause for non-payment. Each route takes time, which is why verifying the main contractor’s payment history before signing matters more than the contract clause alone.
If you want to map out how billing stage dates and PN maturity dates stack up across a project, a 45-minute call is the fastest way to look at one project’s timeline together.