The most common payment term for textile orders from India is a part advance with the balance paid against a copy of the bill of lading. The advance is typically 30 per cent, and the balance is usually due within a few days of the shipping documents being emailed to you. Letters of credit are used for larger orders and for first dealings where neither side has a track record, and document against payment collections sit somewhere in between. Which term you get depends on order size, your history with the mill and how much the mill wants the business.
Indian mills and exporters are used to overseas buyers and will usually negotiate. What they resist is open account on a first order, because they carry the cost of yarn, dyes and labour for weeks before the goods are made. Expect terms to soften after two or three clean shipments.
The usual options
- Advance and balance against bill of lading. Typically 30 per cent with the order and 70 per cent against a scanned copy of the bill of lading, with originals released on receipt of funds. This is the default for most mid-sized orders.
- Letter of credit at sight. The mill ships against your bank's undertaking and is paid on presenting compliant documents. Common for larger orders and new relationships. Bank charges are higher and the documents must be exact, so agree the wording before the mill books production.
- Letter of credit with usance. The same mechanism but with payment deferred, typically 30 to 90 days after the bill of lading date. Mills usually price the delay into the fabric.
- Document against payment. The mill sends documents through the banks and you pay to release them. Cheaper than a letter of credit, but the mill carries the risk that you decline the goods, so it is normally offered only to known buyers.
- Staged payments tied to inspection. An advance, a second payment after a pre-shipment inspection report, and a balance against the bill of lading. This structure suits a new supplier because it ties money to evidence.
- Full advance. Sometimes requested for small or sample-sized orders. It is the riskiest term for you and should be reserved for low values with a supplier you have already checked.
Why a full advance is a problem
Paying the whole value up front removes every incentive for the mill to ship on time or to settle a quality argument in your favour. If the goods are short, off shade or late, your only recourse is goodwill. Small traders in Surat and Ahmedabad sometimes ask for it because they do not hold stock and need your money to buy yarn. If you must do it, keep the value small, confirm the supplier's registration and bank details independently, and treat the order as a trial.
Points to fix in writing
Put the currency, the exact trigger for each payment and the bank details into the purchase order or proforma invoice. State who pays bank charges on each side. If you are using a letter of credit, send the draft to the mill before opening it and ask them to confirm every document they can produce, including the certificate of origin and any test reports.
Tie the balance payment to a document set that you can check, and make sure the bill of lading shows the shipper, consignee and notify party you expect. A short email confirming all of this, acknowledged by the mill, avoids most disputes. Change bank details only on a verified phone call, never on an email alone, since payment diversion fraud is common in textile trade.
How we help
We check the mill's registration, bank details and track record before you send an advance, and we structure staged payments around our own inspection reports so that money follows evidence. We supervise loading and check the document pack against your destination's requirements before the balance is released. A free 20-minute sourcing review is a good first step if you are negotiating terms with a new mill.