How you pay your factory is the second most important commercial term — after price. Choose wrong, and you risk losing your deposit, your shipment, or both. This guide explains the 4 most common payment terms for custom apparel imports, when to use each, and the red flags that mean the factory is risky before you ever wire money.
Why payment terms matter
- Upfront risk: a 30-50% deposit is real money. You need to be sure it lands safely and is used for your order.
- Cash flow: paying too early ties up cash; paying too late may stall production.
- Legal protection: the wrong term leaves no leverage if the factory fails to deliver.
- Speed: some terms slow the deal down (L/C paperwork) while others are nearly instant (wire transfer).
The 4 most common payment terms for apparel imports
1. T/T (Telegraphic Transfer / Wire Transfer)
The most common method for custom apparel imports. The factory provides bank details; you wire funds from your bank to theirs.
- Standard structure: 30% deposit on PO confirmation + 70% balance before shipment
- Or: 50% deposit + 50% balance before shipment (lower MOQ friendly, but ties up more cash for you)
- Cost: 15-40 USD per wire (your bank fees). Factory typically does not charge for receiving wires but may charge for outgoing wires back to you (rare).
- Speed: 1-3 business days for arrival
- Risk: medium. Factory has your deposit; if they do not ship, you have limited recourse beyond the contract and bank dispute mechanisms.
2. L/C (Letter of Credit)
Your bank issues a guarantee to the factory’s bank. The factory ships, presents shipping documents, and gets paid by their bank (which then collects from your bank).
- Used for: very large orders (typically over 50,000 USD) or first-time relationships where extra protection is wanted
- Cost: 1-3% of L/C value, plus bank fees of 300-1,500 USD on each side
- Speed: 10-15 business days to set up the L/C; payment is on document presentation, not on calendar date
- Risk: low for buyer (bank protects), higher for factory (must precisely match L/C terms)
- Drawback: paperwork-heavy, slow, inflexible (any discrepancy in documents = delay)
3. D/P (Documents against Payment) and D/A (Documents against Acceptance)
D/P: factory ships, documents are released to you when you pay. D/A: factory ships, you accept a draft (commit to pay 30/60/90 days later), documents released.
- Used for: established buyer-factory relationships, often in commodity trades
- Risk: D/P is medium for buyer (payment before documents); D/A is medium-high for factory (you have goods before payment)
- Speed: 3-7 days for D/P clearance; 30-90 days for D/A
- Note: less common in apparel than in commodities. Most Chinese apparel factories prefer T/T for simplicity.
4. Open Account (Net 30 / Net 60 / Net 90)
You pay 30/60/90 days after the goods arrive, no deposit. The factory has the most risk; you have the most flexibility.
- Used for: very large brands with strong credit (H&M, Zara, Inditex, Nike contract factories for repeat orders)
- Cost: usually no surcharge, but reflected in unit price
- Risk: zero for buyer, very high for factory
- Note: small brands should not expect this. Even large brands earn this through years of on-time payments.
Typical terms by order size
| Order type | Standard terms | Risk for you |
|---|---|---|
| Sample order (30-80 USD) | 100% upfront | Low (small amount) |
| First production order (new factory) | 30/70 T/T or 50/50 T/T | Medium |
| Repeat orders (3+ with same factory) | 20/80 or 30/70 T/T | Lower (history) |
| Large orders (50,000+ USD) | L/C at sight or 30/70 T/T | Lower if L/C |
| Mega-brand orders (H&M scale) | Open Account Net 60 | Lowest |
The 30/70 split: standard for first orders
For a first production order with a new factory, the most common structure is:
- 30% deposit on PO confirmation (factory uses this to source fabric and start production)
- 70% balance on pre-shipment inspection report (you release after seeing the goods)
The pre-shipment inspection trigger is the key protection. It means:
- Factory cannot ship until you have seen and approved the goods
- Your 70% balance is the leverage: factory wants it, you have it
- If factory is unable to ship (capacity, quality, fraud), you have time to protect your deposit through dispute mechanisms
How to negotiate better terms
For repeat orders or larger volumes, you can negotiate from a position of strength:
- Lower deposit (20/80 instead of 30/70): the factory trusts your repeat business
- Net 30 after inspection: pay 30 days after inspection rather than immediately
- L/C at sight (instead of deferred): the factory’s bank gets paid on document match; you pay your bank in 30 days
- D/P: documents released against your payment (rare in apparel but possible for established relationships)
Trade-off: better terms for you usually means slightly higher unit price or higher MOQ. The factory’s risk reduction cost gets built into your quote. Don’t push too hard — a factory that accepts bad terms for a new buyer is a red flag.
Red flags in payment terms
- “100% upfront” for production orders: only acceptable for samples. For production orders, any factory demanding 100% upfront is either desperate, fraudulent, or does not trust you. None of those are good signs.
- “Pay first, we’ll start”: factory should not need full payment to start fabric sourcing.
- Personal account for the deposit (not company account): major red flag; may indicate personal fraud or shell company.
- Wire destination in a third country (not China, not your country): possible fraud setup.
- “Western Union / MoneyGram / crypto only”: money is untraceable; you have no protection if something goes wrong.
- No proforma invoice: should always have a formal invoice with payment terms spelled out.
- Refusal to put terms in writing: payment terms should always be in the PO / contract, not just verbal.
How to verify a factory can receive payment safely
Before you wire any money:
- Confirm the company name on the wire matches the company on the business license
- Confirm the bank account is in the company’s name (not a personal account or third party)
- Confirm the bank is a major Chinese bank (ICBC, BOC, CCB, ABC, CMB, or Bank of Communications)
- Get a proforma invoice with payment terms spelled out
- For larger orders, consider an L/C at your bank
- Start with a small first order (under 5,000 USD) to test the payment and delivery flow before committing larger sums
FAQ
Should I pay in USD or RMB?
USD. Most Chinese factories invoice in USD and accept USD wires. Avoid paying in RMB from a non-Chinese account — it adds complexity, currency conversion costs, and may trigger additional compliance checks in your country.
What is the safest payment term?
For first orders with a new factory: 30/70 T/T with balance on pre-shipment inspection report. For very large orders or new relationships: L/C at sight. Both give you leverage while keeping the deal moving. The inspection report is your strongest leverage in either case.
What if the factory asks for 100% upfront?
Walk away. The only acceptable 100% upfront is for a sample order (30-80 USD). For production orders, a factory asking for 100% upfront is either desperate for cash (red flag), running a fraud (red flag), or has been burned before (understandable but you cannot trust them with a new order).
What if the factory asks for 50% deposit?
Acceptable. 50% deposit + 50% on pre-shipment inspection is common for first orders or larger MOQ orders. The factory uses your deposit for fabric sourcing (which has minimums of 300-500 kg for custom dye, often $5,000-15,000 USD per color).
Can I pay by credit card or PayPal?
Mostly no for production orders. Chinese factories prefer wire transfers because:
- Lower fees (1-3% on credit cards quickly erodes margin)
- Faster settlement (no merchant processing delay)
- No chargeback risk (factory’s biggest concern with online payments)
For sample orders, some factories accept PayPal or credit card with a 3-5% surcharge. For production orders, expect to wire.
What is an L/C and when is it worth the cost?
Letter of Credit: your bank guarantees payment to the factory’s bank when shipping documents match the L/C terms. Cost is 1-3% of L/C value plus bank fees (typically 500-1,500 USD on each side). Worth it for orders over 50,000 USD with new factories, or when the buyer is in a country with higher fraud risk. The paperwork can be significant — usually 10-15 days to set up, plus a lawyer or trade finance specialist to review the L/C terms before issuance.
How long does a wire transfer take?
International wires typically arrive in 1-3 business days. Chinese banks process the deposit quickly. The factory usually sees the funds the same day or next business day. Allow 3-5 business days total from when you send to when production actually starts (factory may not start until funds are confirmed received, not just sent).
What if there is a dispute after I pay the deposit but before the balance?
Document everything: proforma invoice, payment receipt (SWIFT confirmation), all email and WeChat communication, sample photos, production photos, inspection reports. Most reputable factories will work with you on dispute resolution. If the factory becomes unreachable, the bank that processed your wire may be able to help with a SWIFT trace or recall (but only if the funds have not been withdrawn yet — usually possible within 30-60 days of the original wire).
How this fits the buyer journey
Payment terms sit at the transaction layer — they close the deal after all the upstream decisions have been made:
- The 5-Step Custom Apparel Process — where payment happens in the journey (deposit at PO, balance at inspection)
- Custom Apparel Pricing — how payment terms affect unit price (factory risk premium)
- Shipping Custom Apparel from China — which party pays for shipping depends on incoterm + payment terms together
- How to Vet a Custom Apparel Factory — reducing payment risk starts with choosing the right factory
- Step 1: Consultation — payment terms are usually discussed in the first inquiry
How we work at Kemondo
At Kemondo Apparel, standard payment terms for first orders are 30% T/T deposit on PO confirmation and 70% T/T balance on pre-shipment inspection report approval. For repeat orders and large volumes, we can negotiate 20/80 or L/C at sight. We always invoice from our company account with a formal proforma invoice. Receipts and contract terms are documented in writing for every order.
Have questions about payment terms for your order? Message us on WhatsApp. We usually reply within 12 hours.