The Four Methods, and What Each One Actually Protects
A payment method is a risk allocation device. Telegraphic transfer is cheap and fast but leaves the buyer exposed between payment and delivery. A letter of credit protects the buyer through documentary control, at the cost of fees and administrative discipline. Open account shifts the risk entirely to the supplier and is therefore a privilege earned over time. Platform escrow sits in the middle: a third party holds the money and releases it against a milestone the buyer can see.
The method a factory offers is usually a signal about how it reads the relationship. A new supplier asking for 100 percent advance is pricing in the risk of an unknown buyer. A supplier offering 20/80 to a first-time buyer is either competing hard for the order or has not thought carefully about its own cash flow. Neither behaviour tells you much about quality; both tell you something about how the commercial relationship will be managed. The guide to negotiating price, MOQ and payment terms covers the conversation itself, while this answer focuses on the instruments.
Most linen orders combine two methods rather than using one. A typical program runs a wire deposit, an inspection, a wire balance, and then, from the third order onwards, a short open account term on part of the value. Treating the methods as a menu to choose from once is less useful than treating them as a ladder that changes as the relationship matures.
Telegraphic Transfer: The Default for a Reason
Telegraphic transfer, usually written as T/T, is a bank wire from the buyer's account to the factory's account. It settles in one to three working days, costs a fixed fee at each end plus a small spread on the exchange rate, and requires nothing more than correct beneficiary details. That combination of speed and simplicity is why it accounts for the majority of linen apparel transactions.
The structure matters more than the method. A 30 percent deposit and 70 percent balance before shipment is the standard first-order arrangement, but the trigger for the balance is negotiable. Balance before shipment protects the factory. Balance against a copy of the bill of lading gives the buyer evidence that the goods left the country. Balance after a passed pre-shipment inspection gives the buyer real leverage and is achievable once a relationship exists. Ask which trigger applies before you compare percentages, because two quotes at 30/70 can carry very different risk.
Custom-dyed linen changes the arithmetic. A dye lot is produced for your order and cannot be resold, so the factory carries a sunk cost from the moment the mill runs the fabric. That is why 40 or 50 percent deposits are normal on custom colours, and why a factory that offers 30 percent on a custom dye lot is either holding existing stock in your shade or accepting risk it may later try to recover through the price. The contract clauses every brand should review set out how the deposit, inspection and delivery window should be written down.
- Deposit at purchase order. Books fabric, dye lot and a production slot. Usually non-refundable once the material is committed.
- Balance before shipment. Safest for the supplier, weakest for the buyer, common on first orders.
- Balance against bill of lading copy. A reasonable middle position once two or three orders have run cleanly.
- Balance after inspection. Buyer-friendly, normal for repeat programs and larger values.
Letters of Credit: Documentary Protection With a Cost
A letter of credit substitutes a bank's promise for the buyer's, and pays against documents rather than against goods. It is the right instrument when the order is large enough to justify the fees, when the buyer's own treasury requires documentary credit, or when the supplier and buyer have no trading history and neither will move first. Below roughly 30,000 dollars, the fixed costs usually outweigh the comfort.
The protection is precise but narrow. A compliant document set is paid even if the buyer later dislikes the garments, and a defective set can be rejected even when the garments are perfect. Most problems arise before production starts, when the credit is opened with a document list nobody can satisfy or a latest shipment date that ignores the real production window. The practical discipline is to draft the credit terms at the same time as the purchase order, then check each required document against a real issuer.
| Method | Typical structure | Cost to buyer | Best fit | Main risk |
|---|---|---|---|---|
| T/T advance and balance | 30 percent deposit, 70 percent before shipment or against B/L copy | Wire fees, usually modest | Most first and repeat orders | Buyer funds production before seeing goods |
| L/C at sight | Irrevocable credit opened before production, paid on compliant documents | Issuance, advising, courier and amendment fees | Orders above about 30,000 dollars | Document discrepancies delay payment |
| Usance L/C, 30-90 days | Documents accepted now, payment deferred | Issuance plus deferred payment cost | Buyers needing terms with bank intermediation | Costlier than open account for good credits |
| Open account, Net 30-60 | Invoice paid after delivery | Often built into the unit price | Repeat programs with a clean payment record | Supplier carries all the credit risk |
| Platform escrow | Third party holds funds until shipment or acceptance | Platform fee or spread | Small first orders with an unverified supplier | Coverage limits and slower dispute resolution |
| Documentary collection | Bank releases documents against payment or acceptance | Lower than L/C | Buyers wanting more than T/T but less than L/C | No payment guarantee and no document examination |
Planning structures, not quotations. Bank charges vary by institution and country, and a single amendment can cost more than the original issuance fee on a small credit.
Documentary collection deserves a mention because buyers often confuse it with a letter of credit. In a collection, the bank forwards documents and releases them against payment or acceptance, but it does not examine them for compliance and does not guarantee payment. For linen apparel, where goods are non-standard and difficult to resell, a collection offers limited comfort and is rarely worth the fee.
How a Linen Order Is Paid, Step by Step
1
Quotation and specification freeze
The factory returns a quotation in 3 to 7 working days, and the tech pack, colour standard and size specification are frozen in writing. No payment should move before this point, because the deposit buys a specification, not an idea.
2
Sampling and approval
Sampling runs 7 to 12 days, with a wider sampling window of 7 to 14 days when fabric has to be woven or dyed. Sample fees of 40 to 150 dollars per style are normally refunded against the bulk order, and stock swatches are usually free.
3
Deposit on purchase order
30 percent is standard for stock fabric, 40 to 50 percent for custom dye lots. The deposit books fabric and a production slot, and the refund schedule should already be written into the order.
4
Bulk production and mid-run check
Bulk runs 25 to 35 days, with a first order typically taking 35 to 60 days end to end including sampling. Photos or a short video at cutting and sewing catch problems while they are still cheap to fix.
5
Pre-shipment inspection
An AQL 2.5 inspection confirms the lot before the balance is released. This is the single most valuable condition a buyer can attach to a payment.
6
Balance and documents
The balance is released against a passed inspection, a bill of lading copy or the full document set. Original documents then travel to the buyer or the buyer's broker for clearance.
Deposit and Balance Conventions by Order Type
Deposit ratios are not arbitrary. They track how much of the order the factory has to fund before it can be paid, and how easily those commitments could be redirected to another buyer. Reading the ratio as a cost signal is more useful than arguing about it as a principle.
Stock fabric, first order
30/70 is normal. The fabric exists in the mill's inventory, so the deposit mainly covers cutting, trims and labour scheduling.
Custom dye lot
40/50 deposit is normal. A custom shade cannot be resold, so the factory's exposure starts at the dye house rather than at the cutting table.
Repeat order
20/80 appears once two or three orders have been paid on time, and it functions as a small credit line based on history.
Program with forecast
A shared seasonal forecast can justify a reduced deposit and partial Net 30 to 60 terms, because the factory can plan fabric buying and capacity.
Volume changes the picture as well. At 60 pieces per style and colour, the minimum order is small enough that the deposit is a modest absolute amount, which makes a first order low-risk for both sides. At several thousand pieces, the deposit becomes a real working capital decision and worth negotiating against price, delivery priority or a longer production slot. The MOQ and minimum order guide explains how volume tiers interact with pricing and terms.
Risk Controls on the Payment Side
Before any wire leaves your account
Beneficiary name matches the contracting entity exactly
Bank details verified by phone on a number you already hold
Purchase order signed with quantity, price and delivery window
Payment triggers written down, including inspection release
Refund schedule stated for cancellation at each production stage
Invoice currency and quotation validity confirmed in writing
Inspection standard agreed, normally AQL 2.5
Document set listed, including certificates needed at import
Bank detail fraud is the failure that costs the most and gets discussed the least. A compromised mailbox can send a plausible instruction to redirect a balance to a different account, and the loss normally falls on the buyer because the transfer was authorised. The control is procedural: verify any change of bank details by telephone on a known number, never by replying to the email that requested it, and treat a change of beneficiary name as a stop signal rather than an administrative detail.
The second control is sequencing. Paying a deposit before the specification is frozen converts a commercial discussion into a dispute about what was agreed, and paying a balance before inspection gives away the only leverage the buyer has. Neither mistake is exotic; both are common in first orders placed under time pressure. The contract clauses worth reviewing cover the payment trigger, the inspection standard and the tolerated delivery window, which together define what happens when something goes wrong.
Common Misunderstandings About Payment
A deposit is not a refundable booking fee
Once fabric is cut or dyed to your colour, the material cost is committed and the deposit is normally non-refundable. Before that point, many factories will refund the deposit minus administrative costs. The distinction should be written into the purchase order rather than assumed, because it is the single most common source of first-order disputes.
Three more assumptions cause trouble. The first is that a lower deposit is always better: a factory funding more of the order itself will either price the risk in or slow the schedule when its own cash is tight. The second is that an L/C removes all risk: it removes payment risk on compliant documents and adds documentary risk, which is a different problem rather than no problem. The third is that open account terms can be negotiated at the end of a season, when in practice they are granted at the start of one, against a forecast and a payment record.
Currency is the quiet one. A quotation valid for seven to fourteen days protects the factory from exchange rate movement, and a buyer who pays a deposit in October and a balance in December carries the exposure in between. Fixing the balance amount at the deposit date, or covering it with a forward contract where the size justifies it, converts an unknown into a known cost.
Related Questions Buyers Ask
Do linen manufacturers accept PayPal or credit cards?
Rarely for bulk production, because card fees and chargeback exposure are high on four-figure or five-figure orders. Card and PayPal payments are more common for sample fees and small accessory orders, and some marketplaces process them under trade assurance.
Is a 30 percent deposit always required?
No. It is the standard starting point for a first order in stock fabric. Custom dye lots usually require 40 to 50 percent, and repeat orders can fall to 20 percent. What matters is which costs the deposit funds, and what the refund schedule says if the order is cancelled.
Can payment be split across three milestones?
Yes, and it is a reasonable request on larger orders: deposit, a mid-production payment after cutting, and a balance after inspection. Each milestone adds administration, so factories usually accept a three-stage structure only above a certain order value.
What documents should accompany the balance payment?
A commercial invoice, a packing list, a bill of lading copy or full set, and any certificate required at import. The invoice description should match the goods precisely, including fibre content and garment type, because the same documents serve both the bank and the customs broker.
Need the payment schedule priced with the order?
Send the style, quantity, colour direction and target delivery date. We will return a quotation in 3 to 7 working days with the payment structure, sampling window and production dates stated together, so the cash flow is visible before you commit.
MOQ 60 pieces per style and colour. Sampling 7 to 12 days, bulk production 25 to 35 days, first orders 35 to 60 days.
Related reading: US import documentation and compliance and scaling from first order to repeat production.
