> 50% at the end of 2 weeks when database design and architecture is finalized
Unless the system is that simple, the design is never the final representation of the system. Sooner or later, some unanticipated snag (or gaping hole) will be found which upsets the whole program.
Yes, 50% for this is extreme IMO.

> 20% at the end of 22 weeks upon project completion.
I would expect 4 or 5 milestones in this, each of which would trigger a payment.

--> We are new at this outsourcing and development stuff- what are good milestones to use to trigger payment? perhaps Alpha Version release 30%, and Beta 30% and last 20% upon completion? But again, how is "completion" defined? And what can we expect to see at Alpha and what can we expect to see at Beta (or is this something the client will stipulate and the developers have to deliver?)
--> Any suggestions on what the typical "milestones" are would be of great help!

Split the pot 50:50
One pot is paid pro-rata on the basis of work being done. Each week you get a statement of activities and achievements, and you hand over a bit of money.
--> So say for example we have a list of items in the Scope of Work and as each item/a few items are completed we hand over the money?

The other pot is split into say 5 equal parts, and each part is handed over at the successful completion of a milestone.
--> so basically this 50:50 pot would be combining the milestone structure (in which we pay a percentage at each version release) and the pro-rata structure where we pay per item as it is completed?

If they still want an advance, then I would bargain. Maybe even consider some Escrow arrangement if you feel the amount up front is too much. Make sure you have a good contract.
--> I am ok with paying an advance but will try to bring it to 10/15%. The the remaining 85/90% will be a combination of a milestone/pro-rata per item structure.

What do you think? Is that what you would do?
Thanks again- very helpful!