Knitwear Payment Terms Explained: T/T, L/C, Deposits and How to Protect Your Order

Payment is the part of knitwear sourcing where optimism costs the most. Terms that feel normal in a negotiation become expensive when a shipment is late, a quality dispute arises, or a supplier's cash flow tightens. This guide explains the terms factories actually offer, what they protect, and how buyers build in safety without insulting the supplier.

The Standard Knitwear Payment Structure

The overwhelming majority of knitwear orders — small and large — run on a split payment:

Variations you will meet: 20/80 for very large, established relationships; 40/60 or 50/50 for first orders or custom development, where the factory carries more upfront risk.

Why the deposit exists: the factory spends real money on yarn before a single garment exists. The deposit is not a trust exercise — it funds the dyelot. Understanding this makes the negotiation easier: you are not arguing about trust, you are structuring risk.

T/T vs L/C: What Each Protects

T/T is the default for smaller orders because wire fees are low and settlement is fast — but the buyer bears the risk: you send funds and wait for goods. An L/C inverts that: the bank releases payment only against compliant shipping documents, which is why it dominates large contracts and first-time international relationships.

Where Payment Risk Actually Sits

The risk is not evenly distributed through the order. It concentrates at two points:

• After the deposit: you have paid, and the goods do not exist yet.
• Issued L/C or not, before the balance: the goods exist, but you have not inspected them.

Practical controls at each point: agree milestones in writing, require in-production photos at knitting, linking and finishing stages, and — for larger orders — use third-party inspection before releasing the balance.

Five Practical Protections

1. Tie the balance to inspection, not to a date. "Balance payable after passed final inspection" is a sentence worth putting in the contract.

2. Make the deposit proportionate to the yarn bill. A 30% deposit on a cashmere order may not cover the fibre; do not be surprised by a 40–50% ask on premium yarns.

3. Use a letter of credit for first orders above your comfort threshold. The cost — typically under 2% of value — is insurance against the loss you cannot absorb.

4. Never pay a balance before seeing shipment documentation. Bill of lading, packing list and inspection report before funds move.

5. Put quality terms in writing. Agree the AQL standard, measurement tolerances and the remedy for failure before production, not after.

The Red Flags

• A request for 100% payment upfront on a first order
• Insistence on payment to a different company name than the one you contracted
• Reluctance to name the beneficiary or provide banking details in writing from the company's own domain
• Pressure to skip sampling to "save time"

Any one of these deserves a pause. None is automatically fraud, but together they describe the pattern.

FAQ

What does 30/70 payment terms mean in knitwear?

30% deposit when you place the order (funding yarn and machine booking), and 70% balance payable before or at shipment. It is the most common structure in China-based knitwear manufacturing.

Should I pay 100% before shipment?

No. Paying the full amount before you have shipped goods removes every buyer protection you have. Split terms exist precisely so that the final payment is tied to the goods existing and passing inspection.

When is a letter of credit worth the cost?

Usually for first orders with a new supplier and for contracts large enough that a default would seriously hurt you. The fee — commonly 0.5–2% of the contract value — is cheap relative to the exposure.

Can I negotiate better terms as a repeat buyer?

Yes, and you should. After two or three clean orders, ask to move from 30/70 to 20/80, or from T/T to open-account terms with a partial balance period. Payment terms are a normal part of the relationship ladder.

Sources

• Incoterms and international commercial terms (International Chamber of Commerce) — definitions of delivery obligation, cost and risk transfer
• Standard knitwear export payment practice, China knitwear cluster (2026)

The Bottom Line

Payment terms are a risk structure, not a formality. 30/70 is the industry default because it funds the yarn and keeps the buyer's final payment tied to the goods. Add protection where your exposure is real — inspection before the balance, an L/C for large first orders — and put the quality terms in the contract before production starts.

LINFAIR quotes itemized FOB pricing with transparent payment terms, provides photo and video QC at every production stage, and supports third-party inspection for export orders. Discuss your order structure with our team.