You can generate customer confidence and reduce credit risk by using a neutral body such as a bank to hold the funds until the buyer is happy. There are many forms of trusteeship, secure deposits and escrow accounts to achieve equitable arrangements.
In building work and related contracting there are problems of credit risk, quality disputes and cash flow. But the contractor needs working funds. A Stakeholder Fund can generate client confidence, keep the contractor up to the mark and encourage a bank to advance money for the work.
For example, where the contract terms are 'one-third on contract, balance on satisfactory completion', the client is asked to deposit the initial third into a nominated bank account held for the seller. The stakeholder bank will only release the funds on the written instructions of the purchaser or an agreed arbitrator. The seller will be keen to satisfy the client to obtain payment. If the seller is at fault, the advance may be refunded by the stakeholder bank.