Most founders lose money on payment terms before a single garment is stitched.

Not to fraud, but to a bad split.

They wire too much, too early, and tied to nothing they can check.

Then the goods arrive wrong, and there’s no money left to hold.

This guide fixes that.

It’s the one topic where we can tell you exactly what factories think, because we are one.

We run cut-and-sew, wash, and decoration under one roof in Sialkot, and we take deposits and balances every week.

So instead of guessing at norms from the buyer’s side, here’s how the money actually moves and where a smart founder pushes back.

Two ideas run through the whole guide.

The first is the trust ladder: terms aren’t fixed; they’re a rung you climb as a factory learns you pay.

The second is the trigger rule: no money leaves your account without a specific, checkable event attached to it.

Get those two right, and the rest is detail.

General information, not financial or legal advice. The figures below are industry norms, not Gibben Clothing quotes, unless a callout says otherwise. For a large contract, have your own adviser review the terms.

Chapter 01:

What’s actually normal: deposit & balance structures

There is one number to memorize, and it’s the anchor for every negotiation you’ll ever have with a factory.

30 / 70

The industry-standard split is a 30% deposit at order and a 70% balance before the goods leave the factory.

You wire 30% when you sign the purchase order and confirm production.

The factory uses it to buy your fabric and trims and start the run.

The remaining 70% falls due once production is finished, before the goods are loaded for shipping.

That’s the baseline for most first relationships and for orders under roughly USD 50,000.

Around that anchor sit a few normal variations:

50 / 50 conservative, but legitimate:

Common on a first order, on custom or exclusive fabric, or when the material is a very high share of the price. It’s not a red flag on its own. It becomes one only if it never improves after you’ve paid cleanly a few times.

Milestone splits for bigger or complex runs:

On larger orders you’ll see three payments instead of two: for example 30% at PO, 40% after production or fabric approval, 30% before shipment. This smooths cash flow for both sides and gives you an extra checkpoint. More on tying those to real events in Chapter 2.

30 / 70 against the bill of lading: a reward for trust

Here, the 70% is paid after the factory sends a copy of the bill of lading, i.e., after the goods have shipped. Your cash frees up while the order is in transit. You don’t get this on order; it’s a rung you climb (see Chapter 3).

100% upfront, from a factory you’ve never worked with, on a bulk run, walk away. A demand for full prepayment transfers every ounce of risk to you and removes all your leverage over quality. No reputable factory needs it on a normal order. (The narrow exceptions: a paid sample, tooling, or a genuinely tiny run.)

The Trust Ladder:

Payment terms aren’t a fixed price list; they’re a ladder you climb as a factory learns you pay.

Everyone starts near the bottom.

You move up by delivering exactly what factories value: clean, early payments, and predictable orders.

01 · 50 / 50 unproven buyer, first order, custom fabric.

02 · 30 / 70 before shipment the standard, once you’ve shown you’re real.

03 · 30 / 70 against a copy of B/L balance after goods ship; earned trust.

04 · Milestones / Net terms repeat, high volume, long relationship.

Know which rung you’re on. Every term conversation in this guide is really a question of how to climb one rung without asking the factory to carry unreasonable risk.

Go deeper: the deposit split lives inside the wider deal you sign.See how these terms sit within a full clothing manufacturing agreement.

Chapter 02:

What should each payment be tied to?

Most founders negotiate the percentages and forget the more important half: what each payment is tied to.

A 30/70 split is only as safe as its triggers. “70% before shipping” sounds fine until you realize “before shipping” is a date, and a date can arrive before your goods are actually ready.

The Trigger Rule:

No payment leaves your account without a specific, verifiable event attached to it.

Not a date; an event you or a third party can confirm has happened.

Deposit → trigger: a signed PO and a countersigned pro forma invoice. Now, not “when you’re ready.”

Mid-payment (if any) → trigger: an approved sample, or fabric-in-house photos, or production completion.

Balance → trigger: your approval of a pre-shipment inspection report. This is the big one (see Chapter 5).

If a payment has no trigger, you can check. It isn’t a term; it’s a leap of faith. Rewrite it until it has one.

Here’s why the triggers matter more than the split. Each one does a different job:

The deposit’s job: fund your materials

The 30% almost always tracks the factory’s real out-of-pocket cost to start your order, chiefly fabric and trims bought before anything is cut.

That’s why fabric-heavy or exclusive-material runs draw a higher deposit: the factory is fronting more of your money.

Tie it to the signed PO so both sides know production has genuinely started.

The mid-payment job: buy an extra checkpoint

On a milestone split (say 30 / 40 / 30), the middle payment shouldn’t be a bare date either.

Tie it to something real: production completion backed by line photos or approved lab dips.

You’re paying because a checkpoint passed, not because a calendar page turned.

The balance’s job: hold quality leverage

The 70% is the only lever you keep once the fabric is cut.

Spend it wisely: tie it to an approved inspection, never to “goods finished.”

A finished garment and a correct garment are not the same thing, and the gap between them is exactly what your balance is meant to police.

Go deeper:

The balance’s trigger is an inspection, so it helps to know what a good one checks. See how to read and set a garment inspection checklist before you agree to terms.

Chapter 03:

Negotiating safer terms as trust builds:

You will not get great terms on day one, and you shouldn’t expect to.

Good terms are earned, not asked for.

The founders who climb the trust ladder fastest all do the same unglamorous things.

Trade value the factory actually wants:

Simply asking for a lower deposit is a weak move.

Negotiation is a trade: give the factory something that lowers its risk or raises its profit, and ask for a rung in return.

The strongest levers, roughly in order:

Bigger or repeat orders:

The most powerful lever there is. “If we lift this order 30% and commit to a second run in three months, can we move to a 25/75 split?”

Volume and predictability are worth real money to a factory’s planning.

Longer, calmer lead times:

Rush jobs cost factories money over time by air-freighting materials.

Offer three extra weeks, and you’ve handed over something valuable.

“We can give you more time if we pay 70% against the bill of lading instead of before shipment.”

A clean payment record:

This is the quiet one that beats everything over time.

Pay a few days early, not on the deadline.

Communicate before a wire is late, not after.

Factories move trusted clients up the ladder because trusted clients are cheap to work with.

Simpler logistics:

Taking the factory’s standard consolidated shipping instead of demanding a complicated freight setup is a small gift you can trade for better terms.

Ask for the next rung, not a leap:

Frame the ask as a specific, earned step: “If we pay on time and quality’s right on this order, can we agree in writing that order two moves to 30% deposit, 70% against B/L?” That’s fair, it’s incremental, and it gives the factory a reason to say yes.

Asking to jump from 50/50 straight to Net 30 on order two just gets a polite no.

Watch the mid-production switch.

A warning sign that has nothing to do with your negotiation: a factory that quietly changes agreed terms once your fabric is already cut, suddenly wanting full payment before shipping.

Lock the full schedule in the contract before the deposit clears, so there’s nothing to “renegotiate” under pressure later.

Go deeper:

Better terms protect margin only if the price underneath them is sound. See how deposit and balance sit on top of your garment cost breakdown.

Chapter 04:

Payment methods & protections: T/T, L/C, escrow:

The split decides how much you pay and when.

The method decides how the money travels and who’s protected if something goes wrong.

Four options cover almost every streetwear order.

T/T: The default

A telegraphic transfer (T/T) is a bank-to-bank wire over the SWIFT network.

It’s the standard for garment trade with Asian factories, and it’s what most Sialkot and Chinese suppliers ask for, because it gives them fast, clean cash flow.

It usually clears in one to five business days.

What it costs:

A sending fee (commonly around USD 25-50), plus intermediary-bank charges deducted en route, plus an FX markup, is the least visible cost of all.

High-street banks often bake in a 1-5% currency margin; specialist providers can run far lower.

On a five-figure wire, the FX spread usually dwarfs the flat fee, so it’s worth comparing rails.

Two rules that prevent expensive mistakes:

First, match the beneficiary’s registered company name on the wire exactly to the proforma invoice; a single typo can freeze the transfer.

Second, verify the factory’s bank details on a second channel (a call to a known contact, not a reply to the same email thread).

Payment-redirection fraud, where a scammer emails you “new” bank details mid-order, is the most common way founders lose a deposit.

Ask for the transfer’s MT103 reference to trace it.

L/C: The heavyweight

A letter of credit (L/C) is a bank guarantee governed by ICC UCP 600: the seller gets paid once they present shipping documents that comply exactly.

It shifts risk from the buyer to the bank, which is genuinely safe, but it comes at a price.

Why it’s usually overkill for a small brand:

Issuing-bank commission commonly runs around 0.5-1.5% of the order, plus document-handling fees (often USD 50-300 per set).

Worse, the L/C ties up the full order value at your bank while it’s open; cash you can’t deploy into marketing or samples.

For most streetwear runs, it’s slow, costly, and a liquidity drain.

Reserve it for very large orders or trade lanes that demand it.

Escrow & platform trade protection: the first-order cushion

Escrow puts a neutral third party between you and the factory:

They hold your money and release it only when you confirm the goods.

Marketplace programs like Alibaba Trade Assurance work on the same principle.

For a first, smaller order with an unproven supplier, that neutral hold is real protection.

The trade-offs:

Both sides have to sign up for the platform, and the protection is only as strong as the program’s dispute process.

It suits smaller sums and first transactions; at scale, most brands move to a straight 30/70 T/T with the balance gated on inspection, which gives the same practical leverage more cheaply.

Against a copy of the B/L, cash-flow relief is not a method

Strictly a timing term rather than a rail: you pay the balance by T/T after the factory sends a copy of the bill of lading, so your money is freed while the goods are in transit.

The factory still holds the original B/L, which is needed to claim the goods at the destination port, so it keeps its own protection.

A classic middle rung on the trust ladder.

Go deeper:

The method you choose interacts with who ships and who clears customs.

See how payment sits alongside Incoterms like FOB and DDP.

Chapter 05:

Never pay the balance before approval:

If you remember one thing from this guide, make it this chapter.

Every other decision split, trigger, and method exists to protect one moment: the release of your final balance.

The Prepayment Trap:

The moment you’ve paid 100%, you have zero leverage.

If the goods arrive with crooked seams, the wrong wash, or a color that’s off, all you can do is ask nicely.

Sometimes the factory fixes it. Sometimes it goes quiet.

You’re stuck not because the factory is dishonest, but because you spent your only leverage early.

The whole point of holding 70% is to keep that lever until you’ve confirmed the goods are right. So the rule is simple and it isn’t negotiable:

PSI

Tie your final balance to your approval of a Pre-Shipment Inspection report from a named inspector, not to “goods finished” or to a date.

The clause to put in writing:

Your contract or PO should carry a line to the effect of:

“The final balance payment is due upon the Buyer’s approval of the pre-shipment inspection report issued by [named inspection company].”

That single sentence converts your balance from a scheduled payment into a quality gate.

It gives the factory a direct financial reason to take the last days of production seriously, because the money doesn’t move until the inspection passes.

You can run the inspection yourself if you’re on the ground or hire a third-party inspector; the point is that someone you trust confirms the goods before the wire goes out.

Where this sits on the ladder:

This is the trigger rule applied to the one payment that matters most, and it’s why moving to “70% against B/L” is a genuine rung up: even after goods ship, you’ve already gated the balance on inspection, so you’re not paying blind.

Approval first, wire second. Always in that order.

Go deeper:

The balance gate only works if your inspection has teeth. See how to set the accept/reject bar with an AQL quality-control standard.

Quick reference: normal vs. red flag

Save or screenshot this.

It’s the fastest gut check on a set of terms a factory has just sent you.

Situation Normal Red flag
First order, standard fabric 30/70 or 50/50 balance before shipment 100% upfront demanded
Repeat order, clean record 30/70, or 70% against a copy of B/L Still stuck at 50/50 with no reason
Balance trigger Your approval of an inspection report “Pay before we ship” with no inspection
Custom / exclusive fabric Higher deposit (up to ~50%) Full material and labor prepaid, no checkpoint
Bank details Stable, verified on a second channel “New account” emailed mid-order
Terms mid-production Exactly as signed in the PO Quietly changed after fabric is cut
Method for a first small order T/T 30/70, or escrow/trade protection Western Union or an untraceable rail

Questions founders ask

Not for a first order or a custom-fabric run, 50/50 is the conservative-but-legitimate end of normal.

It becomes a warning sign only when a factory holds you at 50% after several clean orders or pairs it with a demand for the balance before you’ve seen or approved the goods.

Rarely on a production run.

Full prepayment hands the factory all the leverage: if the goods arrive wrong, you have nothing left to withhold.

The narrow exceptions are a very small order, a paid sample, or tooling.

For bulk, a 100%-upfront demand from a first-time supplier is a reason to walk.

For a first, smaller order, escrow or a platform’s trade-protection program adds a neutral party that holds funds until you confirm useful when trust is unproven.

For most direct factory orders, a 30/70 T/T split with the balance gated on an inspection report is faster and cheaper and gives you the same practical leverage.

It funds the factory’s out-of-pocket start-up costs for your specific order, mainly fabric and trims, which have to be bought before a single garment is cut.

That is why the deposit tends to track the material share of the order and why bespoke or fabric-heavy runs draw a higher one.

An approved pre-shipment inspection, not a date on a calendar.

Write the contract so the balance is due on your approval of a PSI report from a named inspector.

“Before shipping” on its own lets goods leave before you’ve confirmed they’re right.

Earn them. Pay a few days early, communicate before deadlines rather than after, keep orders predictable, and then ask for a specific next rung, for example, moving the balance from before shipment to against a copy of the bill of lading once the goods have shipped.

Glossary:

Deposit:

The upfront share of an order (typically 30-50%) is paid at PO to fund materials and start production.

Balance:

The remaining share is due before shipment or against a defined trigger such as an approved inspection.

T/T (telegraphic transfer):

A bank-to-bank wire, usually over SWIFT, is the default rail for garment trade. Clears in ~1–5 business days.

SWIFT:

The messaging network banks use to send payment instructions across borders; the “post” that carries a T/T.

MT103:

The SWIFT message type for a customer wire; its reference lets you trace an international payment.

L/C (letter of credit):

A bank guarantee (governed by ICC UCP 600) that pays the seller once compliant shipping documents are presented.

Escrow:

A neutral third party that holds funds until the buyer confirms receipt is the basis of platform trade-protection schemes.

Trade Assurance:

Alibaba’s platform-level buyer-protection program, an escrow-style hold with a dispute process.

PSI (pre-shipment inspection):

A quality check on finished goods before they ship; the ideal trigger for releasing the balance.

B/L (bill of lading):

The shipping document proves goods were loaded; the original is needed to claim them at the destination port.

Proforma invoice:

The factory’s pre-order quote-invoice states amounts, terms, and beneficiary details; countersign it before wiring.

Net terms:

Payment is due a set number of days after invoice or delivery (e.g., Net 30), a top-rung term earned over time.

Milestone payment:

Splitting the order into three-plus payments tied to production stages, common on larger runs.

From the manual

This is one chapter of The Complete Streetwear Manufacturing Guide

These chapters cover taking a streetwear brand from idea to shipped units, costing, sourcing, tech packs, QC, freight, and launch. All written from the Sialkot factory floor.

Open The Full Guide

On the floor · Sialkot

Written by

Faizan Ahmad

Chief Apparel Technologist & Head of Manufacturing, Gibben Clothing · Sialkot, Pakistan

Faizan leads production at Gibben Clothing, a cut-and-sew streetwear manufacturer in Sialkot, with 8+ years turning raw yarn into retail-ready hoodies, tees, bottoms, jackets, tracksuits, and headwear. He doesn’t just write about clothing; he works the floor, so every guide here is grounded in real fabric behavior, QC standards, and production data from live runs.