Payment Terms in Apparel Trade: T/T, L/C and Safer Ways to Pay Suppliers

By YZR Sweaters · 2026-09

Quality problems get the attention, but for many overseas buyers payment is where the real risk sits. Wire a deposit to the wrong account, accept the wrong schedule, or release the balance before the goods are verified, and no inspection report will save the order. Here is how the common apparel payment terms work, what each one protects, and how to structure a first order so the risk stays small.

The 30/70 pattern you will see most

Across China's apparel trade, the default structure is 30% by T/T as a deposit when the order is confirmed, and 70% against a copy of the bill of lading before the original documents are released. There is logic on both sides. The deposit covers yarn purchases and reserves machine capacity, so the factory is not financing your order alone. The balance tied to the B/L copy means goods are physically on the vessel before your final payment leaves your account.

The weak point is obvious: by the time you pay the 70%, the goods are already packed. Whether that is safe depends almost entirely on whether quality was verified before the balance was released — which is why the payment schedule and the inspection plan belong in the same contract. Currency is the other silent variable on the same order; before locking terms, see our guide to managing currency risk on knitwear orders.

Telegraphic transfer (T/T)

T/T is a plain bank wire: fast, inexpensive relative to other instruments, and available everywhere. The risk depends on the split. Full payment in advance is the highest-risk arrangement for a buyer and is really only appropriate for samples or very small trial orders. Deposit-plus-balance spreads the risk and is the norm. Some buyers negotiate 20/80 instead of 30/70, others add a mid-stage payment against photos of goods in progress — for knitwear, a payment that lands after knitting and before linking is a natural checkpoint. T/T suits buyers who have verified their supplier and want low fees and speed; its weakness is that once the wire clears, your leverage is gone.

Letter of credit (L/C)

A letter of credit moves the trust problem to the banks. Your bank issues a commitment to pay the supplier against documents — bill of lading, commercial invoice, packing list, often an inspection certificate — provided the documents exactly match the terms. The supplier ships knowing payment is secured; you pay knowing the goods are on the water and the paperwork proves it.

The trade-offs are cost and rigidity: bank charges on both sides, document preparation that must be precise, and any discrepancy between the documents and the L/C terms can delay payment. For those reasons, L/C makes the most sense for large orders, for first-time orders where neither side wants to carry the risk, and for markets where currency controls shape how money moves.

PayPal and escrow-style protection

For samples and small trial orders, PayPal is common and reasonable. The fees are high for the supplier — which is why many factories cap the amount or add a surcharge — but the buyer gets a genuine dispute channel. Platform-based trade assurance works on the same idea at larger scale: the platform holds the funds and releases them against milestones, at the cost of platform fees, and only for orders actually placed on that platform. Neither is a substitute for a proper contract on a bulk order, but both are practical ways to de-risk the first contact with a new supplier.

How new buyers keep the risk small

• Start small. A trial order or a sampling program costs little and tells you more about a supplier than any certificate on their website.
• Verify before you wire. A live video factory tour, an audit report (BSCI or SEDEX), or a third-party factory audit confirms the factory exists and does what it claims. A supplier who resists basic verification is telling you something.
• Stage payments to milestones. Deposit, mid-stage, balance — each tied to sampling approval, production start and shipment, not to dates on a calendar.
• Tie the balance to inspection. Release the 70% only after a pre-shipment inspection — your own inspector, or SGS/BV acting for you — has come back passed.
• Watch the details. Pay only to a company account whose name matches the contract, and treat any last-minute "we changed our bank account" email as fraud until proven otherwise — our guide to supplier payment fraud covers the email-compromise pattern behind most large losses.
• Put the essentials in writing. Specification, delivery date, quality standard, inspection rights and payment schedule on one page is enough.

The takeaway

Suppliers who are confident in their production tend to be relaxed about payment terms, because their goal is a second order, not a defended first one. YZR Sweaters works with new buyers on flexible payment schedules: small first orders, staged payments tied to milestones, and balance released after inspection if you want that extra gate. We also welcome factory audits before you commit — better to see the lines running than to take anyone's word for it.

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