Payment terms determine risk exposure between buyer and supplier and directly affect financial cost. Understanding the trade-offs of each option is essential for effective procurement.
Common Payment Terms
- TT (Telegraphic Transfer) โ Bank wire transfer. Typically 30% advance + 70% against BL copy.
- Letter of Credit (LC) โ Bank guarantees payment on document verification.
- DA (Documents Against Acceptance) โ Buyer accepts documents on promise to pay at future date.
- DP (Documents Against Payment) โ Buyer pays before receiving documents.
- Open account โ Payment after receipt, established repeat buyers only.
Cost Comparison
- TT: cheapest, moderate seller risk
- LC: safest for both parties, ~0.15-0.3% per side of transaction value
- DA: buyer-favoured, supplier bears risk of non-payment
- DP: supplier-favoured, buyer pays before goods release
When to Use Each
- First-time supplier relationship: TT with 50/50 or LC preferred
- Established relationships: TT 30/70 standard
- Large orders (>$50k): LC recommended
- Repeat buyers, small orders: Open account or DA
- New buyer / no credit history: LC or DP
Common Pitfalls
- Wire transfer to wrong account (invoice-fraud scam) โ verify via phone call
- LC discrepancies causing delayed payment
- Currency conversion timing risk
- Bank fees passed to wrong party
About Blueridge Trade LLP
Blueridge Trade LLP operates a dual business model. Our textile division is a direct manufacturer โ we own and operate the production of our cashmere, Merino wool, silk, organic cotton, and blended fabric programmes, controlling quality from fibre sourcing through finishing. This vertical integration is what allows us to guarantee Grade A specifications and offer competitive private-label terms to international brands.
Beyond textiles, we operate as a trading and sourcing partner for industrial commodities (copper, aluminium, zinc, tin, tungsten scrap, activated carbon), botanicals and spices, export-grade packaging, and consumables. In these categories we leverage a vetted network of Indian producers rather than manufacturing in-house โ giving international buyers a single consolidated point of contact for both textile manufacturing and broader Indian sourcing requirements.