Every sourcing relationship starts with the same unspoken question, usually asked badly by both sides:
"How do I know you won't take my money and disappear?" "How do I know you won't take my goods and not pay?"
Neither question can be answered with trust. Trust is what you build after the first order, not what you use to decide before it. What you can answer — on both sides — is who carries which part of the risk, at which moment.
That's what payment terms are. Not a courtesy, not a bargaining chip: a risk allocation.
This is how the common structures actually work, what 30/70 protects and what it quietly doesn't, and what to write down before anyone sends anything.
Why deposits exist at all
Buyers new to manufacturing often read a deposit request as suspicion. It usually isn't. It's arithmetic.
Before a single garment can be sewn, the factory has to spend real money on things that can't be un-spent:
- Fabric, often bought up front from a mill
- Dyeing and finishing, paid before delivery of the goods
- Trims — labels, hangtags, zippers, buttons, packaging
- Pattern making, grading, marker making and sampling
- Line setup and labour for the first production days
None of that is recoverable if the buyer walks away. A garment cut to your measurements and dyed to your colour has almost no resale value to anyone else.
So a deposit isn't a guarantee of your good faith. It's the factory refusing to finance your order. And on the other side, a final payment before shipment isn't paranoia either — it's the supplier refusing to hand over goods it can't recover.
Both positions are rational. Terms are the negotiation over where the line sits.
The structures you'll be offered
100% in advance. Rare outside very small orders or first transactions with unknown buyers. It protects the supplier completely and the buyer not at all. Treat it as a red flag unless the amount is small enough that you can afford to lose it.
30/70. Thirty percent deposit, seventy percent before shipment — often "against the copy of the bill of lading," which means once the goods are loaded and the shipping document exists.
This is one of the most common structures in Asian garment manufacturing, and it's common for a reason: it splits the risk at the point where each side has the most to lose.
50/50. Half up front, half before shipment. More supplier-friendly, still workable on a style with heavy material cost.
Net 30 / Net 60. Payment after delivery. Almost never offered on a first order to a new buyer, and rarely by small factories at all, because it means the factory finances your inventory.
L/C at sight. A letter of credit issued by your bank, paying the factory when compliant shipping documents are presented. More secure for both sides, more expensive and slower to arrange, and usually worth it above a certain order value.
None of these is "correct." Each moves cost and risk. The question is which combination you can live with given what you know about the supplier.
What 30/70 protects — and what it doesn't
It's worth being precise here, because buyers often assume 30/70 solves more than it does.
What it protects: your remaining 70% is leverage. If the goods are wrong, you still hold the larger part of the money. That's real and it matters. It also protects the factory, because the deposit covers the materials it has already paid for.
What it doesn't protect: quality, timing, or the deposit itself.
If the goods are late, 30/70 doesn't get them there faster. If they're defective, 30/70 doesn't define what "defective" means — that's a specification problem, not a payment problem. And if the supplier is not what they claimed, the 30% you've already sent is gone regardless of what the remaining 70% was supposed to buy you.
The deposit protects you against non-delivery. It does nothing about bad delivery.
That's why payment terms can't substitute for vetting or for written acceptance criteria. They're three separate defences, and 30/70 is only one of them.
If you haven't verified who you're actually buying from, this guide to telling a factory from a trading company is the one to read before any money moves.
T/T, L/C, escrow and platform protection
These get mentioned loosely, so it's worth separating what each one actually does.
T/T (bank transfer). The default. Fast, cheap, and completely dependent on the relationship. Once sent, the money is gone. There's no dispute mechanism built in — your protection is the contract and the supplier's reputation.
L/C (letter of credit). Your bank promises to pay the supplier's bank once specified documents are presented — typically the invoice, packing list, bill of lading and inspection certificate. It replaces trust with paperwork. It costs money to open, the documents must be exactly right, and discrepancies cause delays. For larger orders, the cost is usually worth it.
Escrow. A third party holds the funds and releases them on agreed conditions. Genuinely useful, but less common in apparel than in software, and the conditions still have to be defined by you.
Platform protection. Marketplaces like Alibaba offer trade assurance schemes that hold payment until defined conditions are met. It's real protection, but the conditions are generic — they won't know that your neckline rib was supposed to be 2cm.
The pattern: every mechanism except T/T adds cost and time in exchange for reducing a specific risk. Choose the one that matches the risk you're actually worried about, not the one that sounds safest.
The red flags in a payment request
Most of these are not about the amount. They're about the pattern.
- A request for 100% up front on a first order. Occasionally legitimate for very small sample orders; rarely for production.
- Payment to a personal account, or to a company name different from the one on the invoice. This is the single most common warning sign, and it's worth stopping the order over.
- A bank account in a different country from the factory. Plenty of legitimate reasons exist — but you should hear one before sending money.
- Pressure to pay quickly because "the price is only good today." Real factories don't price by the hour.
- Refusal to put payment terms in writing, or terms that change between the quote and the invoice.
- A request to split payments across several accounts for no stated reason.
None of these is proof of fraud on its own. Together, two or three of them is a pattern, and patterns are what you act on.
The scam that costs buyers the most
Of everything on that list, one deserves its own section, because it isn't a bad supplier — it's a third party, and it works even when the supplier is completely honest.
Somewhere in the middle of an order, you receive an email that appears to come from your supplier's usual contact. It's polite, it references the order number and the invoice, and it explains that the company has changed banks, or that the usual account is under audit. It attaches a new invoice with new bank details.
You pay. The goods never ship. The money is in a different country and it's gone.
The supplier never sent the email. Their mailbox was compromised, or yours was, and the attacker simply watched a real conversation until the right moment to insert new banking details.
What makes this so effective is that every other signal looks normal — the writing style, the thread history, the order details. Which is why the defence cannot be "look carefully."
The defence is a rule you set in advance, in writing, and never break:
Any change to bank details is treated as a potential fraud attempt, regardless of how the request arrives. Changes are only accepted after independent verification — a phone or video call to a person you already know, using a number you already had, never a number given in the message that requested the change.
Tell your supplier this rule at the start of the relationship, and ask them to confirm it in writing. A legitimate supplier will agree immediately. It also protects them, because their name is on the invoice.
Two smaller habits that close the same gap:
- Never verify bank details by replying to the email that provided them. That's the attacker's own channel.
- On a first order, confirm details once by live video with the person who signs the contract.
This is not a rare edge case. It is the most common way buyers lose money in international trade — more common than outright fraudulent suppliers, because it doesn't require a supplier to be dishonest at all.
First order versus repeat order
The terms that make sense change as the relationship matures, and it's worth planning that progression rather than negotiating it fresh each time.
First order: expect a higher deposit and less flexibility. Your leverage is low because you have no track record, and the factory's risk is high because it has none on you either. This is the point to use a third-party inspection and to be extremely precise in the paperwork — because the paperwork is doing the work that trust will do later.
Second and third orders: this is where terms should start to improve. If they don't, that's information. A supplier who keeps asking for the same structure after several clean orders is either unusually cautious or not treating you as a repeat customer.
Established relationship: this is where net terms and lower deposits become realistic, and where a good supplier will sometimes take on production before the deposit clears. It should be earned gradually, in both directions.
One practical point: a smaller minimum order often comes with less favourable payment terms, and that's a fair trade rather than a penalty. If you want 100-piece runs and flexible terms simultaneously, expect to negotiate explicitly on which one matters more.
What to write into the order
Before any money moves, the purchase order should state:
- The total value and the currency
- The deposit percentage, amount and due date
- The balance percentage and the exact triggering condition — "before shipment," "against copy of B/L," "after inspection passed." These are not the same thing, and the difference is where disputes live.
- The bank details, verified independently by phone or video with a person you've already spoken to
- What happens if delivery is late
- What happens if inspection fails
- Who bears bank charges
That last list is short, and it prevents most of the problems that payment terms are supposed to solve. A payment term is only as strong as the condition attached to it — and a condition nobody wrote down is a condition nobody can enforce.
The short version
Payment terms allocate risk. They don't create trust and they don't guarantee quality.
- 30/70 protects you against non-delivery. It does nothing about late delivery or bad quality — those are specification and vetting problems.
- Every mechanism above T/T costs money and time to reduce a specific risk. Match it to the risk you're actually worried about.
- On a first order, the paperwork is doing the job that trust will do later. Be precise.
- Never send money to bank details that differ from the company you're contracting with, without hearing and verifying a reason.
The best payment term is the one where both sides understand exactly what they're covered for and what they're not.
If you're structuring a first order and want to know what terms are realistic at your volume, write to lemon@mtdmj.com. We work on 30/70 as standard, with a minimum of 100 pieces per style, and we'll tell you straight what changes on a repeat order. The questions buyers ask most are on our FAQ page, and this supplier-vetting checklist covers what to verify before the first payment. You can also start at mtdmj.com.
MTDMJ (Senhean Garment Co., Ltd.) is a custom apparel manufacturer in Guangzhou, China. We have been making garments since 2003 — twenty-three years and more than 900 clients later, in our own factory, with our own sample room, cutting room and export team. We work on a quote basis, with a minimum of 100 pieces per style and 30/70 payment terms. We make custom T-shirts, dresses, shirts and hoodies.
Keep the conversation going. We share sourcing notes, factory-floor detail and buyer guides on LinkedIn, Facebook and Medium. If you're planning an order, write to lemon@mtdmj.com.
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