Four common terms, four different risk profiles. Pick the one that matches the relationship.
Payment terms are where most of the risk sits in an international purchase. The four common options are not interchangeable.
Typically 30% deposit, 70% against the bill of lading copy. This is the most common arrangement and balances risk reasonably between both sides.
A bank guarantees payment against compliant documents. Secure, but slow and expensive, and documents must match exactly.
The common failure: a discrepancy between the invoice, packing list and bill of lading. One missing letter can cause the bank to refuse payment.
The buyer pays to release the documents. The seller retains some control but carries the risk that the buyer simply does not pay.
Goods ship first, payment 30–90 days later. Highest risk for the seller; appropriate only for established relationships.
| Term | Seller risk | Buyer risk | Cost |
|---|---|---|---|
| Full prepayment | lowest | highest | low |
| 30% deposit | low | medium | low |
| LC | low | low | high |
| DP | medium | low | medium |
| OA | highest | lowest | low |
New supplier: 30% deposit, 70% against bill of lading copy. Avoid full prepayment and avoid OA.
Established supplier: 50/50, DP, or OA 30 days for larger accounts with a credit limit.
Large orders: LC is worth the cost, but check every document against the LC terms before presentation.
For large OA balances, credit insurance is available and worth pricing in.
