Payment terms are where a sourcing deal either becomes a partnership or a poker game. Buyers want to pay late; factories want to be paid before the container leaves. The right structure is neither extreme — it is a schedule where each payment buys something concrete. A deposit buys production capacity, a balance buys documents, and a final release buys confirmed quality. Get the sequence wrong and you fund risk instead of reducing it.
The market standard: 30/70 T/T
For custom bags, a 30% deposit with the 70% balance against a bill of lading copy is the working norm. Deposit ratios across the industry run from 30% to 50%. The higher end is normal for first orders or heavy customization; the lower end is normal for repeat programs with a track record.
Why the deposit exists: it funds raw materials, which a factory must buy before it can start cutting. Why the balance sits against documents: it gives the buyer a checkpoint before the goods lose visibility.
L/C at sight versus L/C 90 days
A letter of credit adds bank safety, but also cost. An L/C at sight carries a modest fixed fee; an L/C at 90 days carries a discounting cost of roughly 1.5% to 3% that someone ultimately absorbs. If a buyer insists on deferred payment, expect that cost to surface in the unit price.
- 30/70 T/T — buyer protection: low; added cost: none
- L/C at sight — buyer protection: high; added cost: small fixed fee
- L/C 90 days — buyer protection: high; added cost: 1.5% to 3%
- Inspection-linked balance — buyer protection: high; added cost: third-party inspection fee
Link the balance to inspection, not to goodwill
The most balanced structure for a custom program looks like this: 30% deposit, then the balance released against a bill of lading copy, with the final 10% to 20% held until a third-party inspection passes. SGS, BV or an agreed agent all qualify. This makes quality the trigger for payment rather than a promise.
Ask the factory to quote tooling and development fees as a separate line. Molds, screens and sampling are real costs; quoting them openly is more honest than burying them in unit price.
The trap signals
Two patterns should stop a buyer cold.
The low-deposit lure: a factory quoting 10% down and 90% after arrival is either desperate for cash flow or planning to underdeliver. Both raise your risk. The full-payment-and-vanish: a 100% advance with no inspection clause gives you no leverage once the money clears.
Balance cuts both ways. Buyers who pay deposits on time and lock volume with a firm PO get better scheduling — and better prices — than buyers who renegotiate terms on every order.
Build a schedule, not a favor
Good bag supplier payment terms read like a project plan: money moves when a milestone is met. That protects the buyer’s capital and the factory’s cash flow at the same time. Discuss the structure before the PO, agree it in writing, and treat it as part of the product spec.
See how SimiBag structures terms for repeat programs at https://simibag.com.