Payment Terms in Bangladesh Garment Sourcing: LC, T/T and How to Protect Your First Order

The most common payment structure for apparel orders from Bangladesh is a 30% deposit by T/T on order confirmation, with the 70% balance paid by T/T against shipping documents — typically the Bill of Lading — once goods are ready to ship. For larger or first-time orders, buyers commonly use a Letter of Credit (L/C) instead of T/T, which routes payment through both parties’ banks and ties it directly to agreed documentation, reducing risk on both sides.

That single paragraph answers the question most European buyers type into Google before their first Bangladesh order. What it doesn’t answer — and what actually determines whether your first shipment goes smoothly — is which structure fits your situation, what each one protects you against, and where buyers lose money even when they’ve technically “done it right.” That’s what this guide covers.

Why Payment Terms Matter More Than the Price

A garment order from Bangladesh is, structurally, a bet that a factory eight to twelve time zones away will deliver the right goods, on time, to specification, after you’ve sent money. Payment terms are the mechanism that manages that risk on both sides — for the buyer, that the goods will actually be produced and shipped as agreed; for the factory, that they won’t tie up capital, fabric and machine time for a buyer who disappears. Every payment structure in the industry is really just a different allocation of that risk, and understanding the allocation matters more than memorising the jargon.

The Core Payment Methods in Bangladesh Garment Sourcing

T/T (Telegraphic Transfer)

T/T — a standard bank wire transfer — is the default payment method for the large majority of Bangladesh garment orders, particularly for repeat buyers and mid-sized programmes. It’s fast, low-cost to arrange, and flexible on timing. The near-universal structure is:

• Advance T/T: 30% (commonly 20–40%) of order value paid on order confirmation, before production starts.
• Balance T/T: The remaining 70% (or agreed balance) paid once goods are ready — either against the Bill of Lading, against a pre-shipment inspection report, or a mix of both.

T/T is simple and cheap, but it carries more one-sided risk than an L/C: once your deposit is sent, your only real leverage until the balance payment is the relationship, the factory’s reputation, and — critically — whoever is managing quality control on your behalf. This is precisely where working with an established buying house changes the risk profile, because the deposit is going to a partner with 24 years of factory relationships and reputational exposure of its own, not a factory you found last month.

Letter of Credit (L/C)

A Letter of Credit is a formal payment guarantee issued by the buyer’s bank in favour of the supplier, releasing funds only once specified documents — commercial invoice, packing list, Bill of Lading, certificate of origin, and often a quality inspection certificate — are presented and verified as compliant. Two variants come up most often in garment sourcing:

• L/C at sight: The exporter is paid as soon as compliant documents are presented to the bank, typically within seven working days.
• Deferred (usance) L/C: Payment is made a fixed number of days after document presentation — 30, 60 or sometimes 90 days — giving the buyer extended payment terms while still guaranteeing the supplier eventual payment.

L/Cs cost more to arrange (banks typically charge an issuance fee, often in the €200–300 range plus a percentage of value) and require more paperwork discipline, since banks deal strictly in documents, not goods — if your paperwork doesn’t match the L/C terms exactly, payment can be delayed even when the goods themselves are fine. In exchange, an L/C gives both sides a bank-enforced guarantee rather than a trust-based one, which is why larger orders, first-time supplier relationships, and buyers working with unfamiliar factories often default to it.

Cash in Advance (CIA)

Full payment before production begins. This is rare in established Bangladesh sourcing relationships and is generally a red flag when a supplier insists on it for a first order — it shifts essentially all the risk onto the buyer with no documentary or banking safeguard in return. It’s occasionally used for very small sample or trial orders where the value at risk is low.

Open Account / Net Terms

Payment due a set number of days after invoice or delivery (Net 30, Net 60), with no upfront deposit. This is the buyer-friendliest structure and is almost never offered to new customers in Bangladesh garment sourcing — it’s reserved for long-standing relationships with a proven payment history, and even then usually applies only to reorders of already-approved styles.

Which Payment Structure Should You Use as a European Buyer?

There isn’t a single right answer — it depends on order size, whether it’s your first order with a given supplier, and how much documentation confidence you need.

Buyer situation	Typical payment structure
First order, smaller volume, working through a buying house	30% T/T deposit / 70% T/T against documents
First order, larger volume or unfamiliar direct factory	L/C at sight
Established relationship, repeat orders	T/T, sometimes with reduced deposit percentage
Large programme buyer wanting extended payment terms	Deferred (usance) L/C
Sample or trial order	CIA on a small, capped amount

Brands sourcing from Germany, France, the Netherlands, Denmark, Spain and the UK follow broadly the same structures — the choice between T/T and L/C is driven far more by order size and supplier relationship than by which European market you’re selling into. Where markets do differ slightly is banking cost and familiarity: L/Cs are routine for larger German and Dutch import businesses with established trade-finance relationships, while smaller independent brands across all these markets — including newer Nordic and Spanish labels — more commonly start on T/T through a buying house precisely because it avoids the fixed cost and paperwork overhead of an L/C on a first, smaller order.

Currency and FX Risk: A Payment Term Most Buyers Overlook

Nearly all Bangladesh garment quotes are priced and invoiced in USD, even when the buyer is in the eurozone, Denmark or the UK. That creates an FX exposure that sits quietly inside every payment term:

• T/T deposits are exposed to whatever EUR/USD, GBP/USD or DKK/USD rate applies on the day each transfer is sent — a 30% deposit and a 70% balance sent weeks apart can land at meaningfully different exchange rates on a large order.
• L/Cs are typically fixed in USD at issuance, which locks the exchange rate exposure to the date the L/C is opened rather than the date goods ship — useful for budgeting, but it means the FX rate is committed before production even starts.
• Some buyers hedge larger orders with a forward FX contract through their bank, locking today’s rate for a payment due in 90–120 days. This is worth discussing with your bank for any order where a 3–5% currency swing would meaningfully affect margin.

Ask your supplier or buying house to quote landed cost in your local currency alongside the USD FOB figure, so you can see the FX assumption baked into the number rather than discovering it at payment time.

The Documents That Should Accompany Every Payment

Regardless of whether you’re paying by T/T or L/C, the same core documents should exist and be checked before funds move:

• Proforma Invoice (PI) — the formal quote confirming price, quantity, product specification and payment terms, issued before the deposit.
• Commercial Invoice — issued at shipment, matching the PI exactly in quantity, price and product description.
• Packing List — carton-by-carton breakdown of contents, weights and dimensions.
• Bill of Lading (B/L) — the shipping company’s confirmation that goods were loaded, and the document that typically triggers balance payment.
• Certificate of Origin — required for EU/UK duty-preference claims under EBA or DCTS; without it, your Bangladesh-origin goods may not clear at the duty-free rate they’re entitled to.
• Pre-shipment inspection report — independent confirmation that goods meet your AQL standard, ideally required before balance payment releases, not after.

A mismatch between the PI, commercial invoice and packing list is one of the most common reasons an L/C payment stalls — banks will flag even a minor quantity or description discrepancy, regardless of whether the physical goods are correct.

A Worked Example: 3,000-Piece Knitwear Order to Germany

To make the mechanics concrete, here’s how a typical mid-sized order flows under a standard T/T structure:

1. Order confirmation: Buyer and supplier agree the PI for 3,000 organic cotton sweatshirts at an agreed FOB price. Buyer sends 30% deposit by T/T.
2. Production start: Fabric sourcing and cutting begin only once the deposit clears — this is standard practice and protects the factory from committing fabric and machine time against an unconfirmed order.
3. Pre-production sample approval: Buyer approves the PP sample before bulk cutting proceeds — a step that should happen regardless of payment method, and is separate from the payment schedule itself.
4. Independent pre-shipment inspection: Once production is complete, an independent inspector checks a statistical sample against the buyer’s AQL standard (commonly AQL 2.5 for apparel).
5. Balance payment triggered: Only once the inspection report confirms goods pass, the buyer releases the 70% balance by T/T, referencing the Bill of Lading.
6. Shipment and clearance: Goods ship to Hamburg or Rotterdam under EBA duty-free terms, using the Certificate of Origin to confirm Bangladesh origin at customs.

Note where the inspection sits in that sequence: before the balance payment, not after. Buyers who release the balance the moment the B/L is issued — without waiting for inspection sign-off — remove their own leverage at exactly the point a defect or shortfall would otherwise still be fixable.

Where Buyers Actually Lose Money on Payment Terms

The payment structure itself is rarely where things go wrong. These are the real failure points:

Paying the Balance Before Independent Inspection

The most common costly mistake is releasing the 70% balance payment against the Bill of Lading alone, without an independent pre-shipment inspection first. A B/L confirms goods were loaded onto a vessel — it says nothing about whether they meet your specification or AQL standard. Tie your balance payment to inspection sign-off, not just shipping documents.

L/C Terms That Don’t Match the Purchase Order

A Letter of Credit is a separate legal instrument from your purchase order or proforma invoice, and banks will refuse to release payment over document discrepancies as small as a mismatched quantity or an unclear product description — even if the actual goods are correct. Every L/C should be checked line by line against the PO before it’s issued, ideally by whoever is managing the order on the ground in Bangladesh.

Underestimating Total Landed Cost Before Committing a Deposit

Sending a 30% deposit based on FOB price alone, without having modelled freight, duty and VAT into your landed cost, can leave a buyer financially committed to an order that no longer works on margin once the full cost lands. Our Bangladesh FOB and landed-cost guide walks through building that full picture before you confirm.

No Written Recourse for Defects or Delays

Payment terms and quality recourse are often treated as separate conversations when they should be the same one. Before any deposit is sent, agree in writing what happens if goods arrive outside AQL tolerance or miss the delivery window — replacement, credit, or price adjustment — so the payment schedule and the quality safety net are aligned from day one.

How a Buying House Changes the Payment Risk Equation

Paying a factory directly puts the full weight of vetting, inspection and dispute resolution on the buyer. Working through an established buying house changes that in a few concrete ways:

• Deposits go to a partner with standing, not a factory you’ve just met. Milky Fashions has operated since 2002 and has reputational and commercial exposure that a new, unvetted factory doesn’t.
• Open costing removes payment-related surprises. Because the full cost sheet — fabric, CMT, trims, testing, overhead, commission — is visible from the start, there’s no late-stage repricing that changes what your deposit was actually calculated against.
• Independent quality control is built into the payment trigger, not bolted on. Balance payments are structured against inspection sign-off, not just shipping documents, closing the most common loss point described above.
• Documentation for L/C compliance is managed on the ground. For buyers who prefer or require an L/C, having a Bangladesh-based partner check documents against L/C terms before submission avoids the delays and discrepancy disputes that stall payment release.

What to Ask Before You Send a Deposit

Before committing payment on any Bangladesh garment order, get clear, written answers to:

• What exactly triggers the balance payment — the Bill of Lading, inspection sign-off, or both?
• Who conducts the pre-shipment inspection, and is it independent of the factory?
• If an L/C is used, has it been checked line by line against the purchase order?
• What is the agreed remedy — replacement, credit, or price adjustment — if goods arrive outside AQL tolerance?
• Is the FOB price you’re paying a deposit against based on a full, open cost sheet, or a single unexplained number?

If a supplier resists clear answers to any of these, treat the resistance itself as information.

Frequently Asked Questions

What are standard payment terms for Bangladesh garment orders?

The most common structure is a 30% deposit by T/T on order confirmation, with the remaining 70% paid by T/T against shipping documents once goods are ready to ship. Larger or first-time orders often use a Letter of Credit instead of T/T for added security.

Is a Letter of Credit safer than T/T for a first order?

An L/C provides a bank-enforced guarantee tied to specific documents, which reduces risk compared to T/T on an unfamiliar direct factory relationship. However, working through an established buying house with independent quality inspection can make T/T equally safe for smaller first orders, without the added cost and paperwork of an L/C.

What percentage deposit is normal for a Bangladesh garment order?

A 30% deposit is the most common figure, though it can range from 20–40% depending on order size, product complexity and the buyer-supplier relationship. Repeat buyers with an established track record sometimes negotiate a lower deposit percentage.

Should I pay the balance before or after inspection?

Balance payment should always be tied to independent pre-shipment inspection sign-off, not just the Bill of Lading. A B/L confirms goods were shipped — it does not confirm they meet your quality specification or AQL standard.

Do payment terms differ between European countries when sourcing from Bangladesh?

The core payment structures — T/T and L/C — are consistent across German, French, Dutch, Danish, Spanish and UK buyers. The choice between them is driven mainly by order size and supplier familiarity rather than which European market the buyer is based in, though larger Northern European importers use L/Cs somewhat more routinely due to established trade-finance relationships.

Source and Pay with Confidence Through Milky Fashions

Milky Fashions has managed payment terms, open costing and independent quality inspection for European fashion brands sourcing from Bangladesh since 2002. We structure deposits and balance payments around inspection sign-off as standard, and we support both T/T and L/C arrangements depending on what fits your order.

Send us your tech pack and order details and we’ll set out clear, written payment terms before you commit a deposit.