Every new buyer asks the same question in a different form: how do I pay you, and how do I know the goods will actually arrive. The honest answer is that two instruments cover almost every first order we write. A Letter of Credit (LC) at sight, or telegraphic transfer (TT) split 30/70. The right one depends less on order size than on how much history exists between the two parties.
What each instrument actually does
TT (telegraphic transfer) is a direct bank-to-bank wire. No documentary review, no issuing-bank fee, funds move in one to two working days. The entire mechanism runs on trust. The buyer pays before or during production, on the expectation that the supplier ships what was agreed.
LC (Letter of Credit) at sight routes the payment through both banks. The buyer's bank issues the LC; our bank pays out only once we present a document set that matches the LC's terms exactly: Commercial Invoice, Packing List, Bill of Lading, Certificate of Origin. A mismatched date or a misspelled consignee name can stall payment until the discrepancy is corrected. That friction is the point. It removes the buyer's non-delivery risk and our payment-default risk in the same instrument.
The actual cost of an LC
Issuing-bank charges for an LC at sight typically run 0.5-1.5% of invoice value, plus a SWIFT and advising fee on our end, plus 3-5 working days added to the cycle for issuance and document presentation. On a USD 20,000 first order, 1% is USD 200. That is the entire cost of removing the two things a first-time relationship cannot yet answer: will the buyer pay, and will the supplier ship.
What we actually offer
For first-time buyers we accept either: 30% advance TT against the proforma invoice and 70% against a copy of the Bill of Lading, or 100% LC at sight from a confirmed bank. Both are on the table from the first email. We do not push one over the other, because the right choice depends on the buyer's own risk tolerance and banking relationships, not ours.
After three successful shipments with clean documentation and on-time payment, we move the relationship to negotiated open-account terms. The threshold is shipment count, not cumulative order value. A buyer running four small orders a year qualifies at the same pace as one running four large ones, because what we are actually measuring is whether the documentation and payment cycle has run cleanly, not how much money moved.
Where TT alone is the wrong call
A 100% advance TT with no LC and no inspection clause puts all the risk on the buyer: full payment before the container leaves India, on trust alone. We do not ask new buyers for this, and any supplier who does on a first order is asking the buyer to underwrite a relationship that does not exist yet. If a counterparty insists on 100% advance with no fallback and no trading history, that is a reason to slow down, not speed up.
The takeaway for buyers
If a supplier will not put an LC option on the table for a first order, ask why. There is a real cost to an LC, 0.5-1.5% and a few extra days, but it is priced correctly against what it removes. Once the relationship has three clean shipments behind it, the cost of that insurance stops making sense. That is exactly when we drop it.
— Nitik · Darsavio EXIM