Yarn Payment Methods —
T/T, L/C & Deposit Ratios Explained
You've agreed the yarn spec, the price, and the Incoterm — now the supplier's Proforma Invoice asks for "30% T/T deposit, balance before shipment". Is that normal? Should you push for a Letter of Credit instead? How much protection do you actually have if something goes wrong? Payment terms are where trust and risk get negotiated directly. 💳
This guide explains the payment methods used in the international yarn trade — T/T, L/C, and others — what deposit ratios are typical, who bears the risk at each stage, and how to structure payment terms sensibly, especially for a first order with a new supplier. ✅
💳 The Three Main Payment Methods
T/T is simpler and cheaper for both sides, and most yarn transactions — especially repeat business — use it. L/C makes sense for larger orders, new relationships where both sides want formal protection, or when your company's finance department requires it for compliance. Many buyers start with T/T for small trial orders, then consider L/C once order sizes grow significantly.
💰 Typical T/T Deposit Structure
For T/T payments, the industry-standard structure splits payment into a deposit and a balance, tied to production milestones: 📊
The classic ratio is 30% deposit / 70% balance before shipment, but this varies by order size, relationship length, and product type: 📋
| Situation | Typical Deposit Ratio | Notes |
|---|---|---|
| First order, new relationship | 30–50% | Higher deposit common until trust is established |
| Established repeat buyer | 20–30% | Lower deposit as trust builds over time |
| Custom colour / spec order | 30–50% | Higher deposit protects supplier's committed production cost |
| Stock item, ready to ship | 0–30%, or 100% before shipment | Less production risk for supplier, can be more flexible |
| Very large order | Negotiable, sometimes with L/C | Often moves to L/C for mutual protection at scale |
Most yarn suppliers require the balance payment before the goods leave China (before shipment or against a copy of the Bill of Lading), not after the goods arrive at your port. This protects the supplier from a completed, shipped order with no guarantee of payment. If a buyer wants payment after arrival, this typically requires L/C, D/P, or a very well-established trust relationship — it's not a standard first-order request.
⚖️ Where the Risk Sits — Buyer vs Seller
Every payment structure balances risk between the two parties. Understanding this helps you see why suppliers ask for what they ask for: 🔍
This is exactly why L/C exists — it removes the "trust" element by having banks guarantee both sides' performance against agreed documents. For high-value or first-time large orders, L/C is worth the extra cost and time for the added protection. 🏦
🛡️ Reducing Risk When Using T/T
If you're using T/T (the most common method), here's how to protect yourself, especially on a first order: ✅
- 🔍 Verify the supplier before sending any deposit — business licence, years in operation, factory visit or video call, references. See our reliable supplier guide
- 🧪 Approve a sample first — never pay a deposit before you've approved the quality and colour on a sample
- 📄 Get a clear Proforma Invoice (PI) — full spec, quantity, price, Incoterm, payment terms, and delivery timeline in writing before paying anything
- 🏦 Pay to the company's official bank account — verify the account name matches the company name on the contract exactly; be alert to last-minute "new bank account" requests, a common fraud pattern
- 📸 Request production updates — photos or video of yarn in production before the balance payment
- 📋 Consider a smaller trial order first — see our MOQ & sample guide for starting with a manageable first order
A well-known scam pattern: partway through a deal, you receive an email claiming to be from your supplier saying "our bank account has changed, please pay to this new account instead." This is often a hacked email account. Always verify any bank account change by phone or a separate, trusted communication channel — never by replying to the same email thread. This single check prevents the majority of B2B payment fraud.
📜 How a Letter of Credit Works — Step by Step
- Buyer applies for an L/C at their bank, specifying the exact terms (amount, documents required, shipment deadline, etc.), based on the agreed contract
- Buyer's bank issues the L/C and sends it to the seller's bank
- Seller's bank notifies the seller (this is called "advising" the L/C)
- Seller reviews the L/C terms carefully — any mismatch with the agreed contract should be corrected before shipping
- Seller ships the goods and gathers the required documents (Bill of Lading, invoice, packing list, certificate of origin, etc.)
- Seller presents documents to their bank, which checks them against the L/C terms
- Banks transfer payment once documents match — buyer's bank debits the buyer's account (or credit facility) and pays the seller's bank
Banks pay against documents, not against the actual physical goods. If there's any discrepancy between the shipping documents and the L/C terms — even a small typo in a quantity or date — the bank can refuse payment until it's corrected. This is why L/C transactions require careful document preparation and is a key reason experienced trade staff (freight forwarders, trade finance teams) are valuable for L/C deals.
Yaakan typically works on T/T with a 30% deposit and 70% balance before shipment for standard orders, and can accommodate L/C for larger orders or where a buyer's finance department requires it. For first-time buyers, we're happy to discuss a structure that builds confidence on both sides — including smaller trial orders. See our import guide for the full purchasing process.
📝 Summary
- 🏦 T/T (wire transfer) — most common, fast, low-cost, relies on trust between parties
- 📜 L/C (Letter of Credit) — bank-guaranteed protection for both sides, slower & costlier, common for large/new-relationship orders
- 💰 Typical T/T split: 30% deposit before production, 70% balance before shipment (varies by order size and relationship)
- ⚖️ Both sides carry risk in T/T — deposit protects seller's production cost; sample approval & verification protect buyer
- 🛡️ Reduce T/T risk: verify supplier, approve sample first, get a clear PI, verify bank details by phone, request production photos
- ⚠️ Watch for fraud: always verify bank account changes through a separate channel, never just by email reply
- 📋 L/C works on documents, not physical goods — precise document matching is essential
Ready to discuss payment terms for your order? Contact Yaakan — we'll structure terms that work for both sides, especially for a first order. 👇
Discuss Payment Terms
T/T or L/C — tell us your order size and requirements; we'll propose fair terms and send a clear Proforma Invoice.