Have You Used This Payment Term?

Distinguish Down Payment from Deposit
How can we do if customers doubt you are a trader?

I have been working in foreign trade circle for so many years, and the form of payment is TT or LC at sight according to the regulations of companies. These two types of payment form are frequently used. It is safe and is accepted by most of clients. But some large corporations or clients from Occident would prefer Usance LC for they have large amount of purchasing money for many projects. In addition, they need some time for capital recovery. So they may face the danger of capital chain rupture if they invest much capital into the purchasing market but fail to get it back. That’s why many large companies prefer Usance LC.

I have a regular client who had stable purchase quantity and placed another order shortly after the arrival of cargo with the payment form of LC at sight. At the beginning of this year, the client suddenly increased the purchase quantity to over the amount of the whole year, which delighted me for some time. However, the client didn’t choose to pay by LC as usual but asked for LC 90 days with the reason that they won’t accept LC at sight for such a big deal. As a manufacturer making a little profit we didn’t consider accepting harsh terms of payment, especially one with so many risks. But we also don’t want to miss opportunities for further cooperation. For this, I refer to the Internet:

1、Firstly, check the credit of the companies of clients. You should resolutely refuse those companies with bad credits for guaranteed form of payment even if you will lose a portion of profits. You could find credit guarantee company which will check the company’s creditworthiness by a particular way. If clients flee without payment, guarantee company could also pay money to sellers temporarily, which is safer.


2、To make sure the credit of the issuing banks is the way to avoiding the situation where clients flee without payment but have taken your cargo away. You must check the credit of the issuing banks in advance or consult with clients to know the banks they accept. Domestic banks always consider choosing banks with good reputation and negotiate with clients to select the best one.


3、Considering the impact on prices caused by movement in exchange rates in quotation with Usance LC. And to avoid the loss caused by it, you should adjust the prices.


4、In addition, to be safer, it’s suggested that suppliers could negotiate with clients that clients pay a part of down payment and the left by Usance LC.

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