How escrow protects both sides of a cross-border transaction

When a buyer in Lagos agrees to purchase equipment from a supplier in London, both sides want the same thing: a deal that completes as agreed. Yet each is being asked to take a risk on someone they may never have met. Escrow exists to take that risk off the table.

Why trust is the hardest part of a cross-border deal

Domestic transactions come with a safety net of familiarity. You may know the seller by reputation, visit their premises or rely on local courts if something goes wrong. Across borders, most of that disappears. Different legal systems, currencies, time zones and business customs all make it harder to check who you are dealing with — and harder to put things right if a deal falls through.

The result is a stand-off that many entrepreneurs will recognise. The buyer does not want to pay in full before the goods arrive; the seller does not want to ship before they have been paid. Somebody has to move first, and whoever does carries all of the risk.

How escrow works, step by step

Escrow breaks that stand-off by introducing a neutral party who holds the money while each side does their part. The details vary from deal to deal, but the shape is usually the same:

1. Agree the terms. Buyer and seller agree what is being exchanged, the price and — crucially — the conditions that must be met before the money is released.
2. Fund the escrow. The buyer pays the agreed amount to the escrow provider rather than directly to the seller. The seller can see that the funds are committed.
3. Deliver. With payment secured, the seller ships the goods or delivers the service, confident that the money exists and is waiting.
4. Confirm. The buyer checks that the agreed conditions have been met — for example, that the goods have arrived in the condition described.
5. Release. Once both parties confirm, the escrow provider releases the funds to the seller and the transaction is complete.

Release conditions: the part worth getting right

Most escrow difficulties trace back to conditions that were vague at the start. “Goods delivered in good condition” sounds reasonable until the parties disagree about what good condition means. Strong release conditions share a few qualities:

• Specific. Describe exactly what will be delivered — quantities, models, specifications or the scope of a service.
• Verifiable. Agree what evidence will show the condition has been met, such as a signed delivery note, an inspection report or photographs taken on arrival.
• Time-bound. Set a reasonable window for delivery and for the buyer to inspect, so funds are not held indefinitely.
• Agreed in writing. Both parties should confirm the same wording before any money moves.

When escrow is worth using

Escrow is not necessary for every purchase. Long-standing suppliers you have worked with for years may not need it. It earns its place where the stakes or the uncertainty are higher:

• A first transaction with a new buyer or supplier, particularly in another country.
• Higher-value purchases such as equipment, vehicles or bulk stock.
• Service agreements where payment is linked to a milestone being completed.
• Transactions arranged online, where the parties have not met in person.

For sellers, escrow can also be a selling point. Offering it signals confidence in what you are delivering and removes a common reason for new customers to hesitate.

Questions to ask before you start

Before you agree to use escrow — whichever provider you choose — make sure you can answer these questions clearly:

• Who is the escrow provider, and how are the funds held while the deal is in progress?
• What exactly are the release conditions, and what evidence will satisfy them?
• What happens if delivery is late, incomplete or disputed?
• Which costs apply, and who pays them? Ask for this in writing before you commit.
• How will each party be kept informed as the transaction progresses?

ASL Business Growth offers escrow as a neutral third party for buyers and sellers, alongside business registration and international expansion support. If you are planning a cross-border deal, book a consultation and we will help you set conditions that protect both sides.