50% advance and 50% before shipment
Final terms depend on buyer profile, supplier terms, order size, inspection requirements, and product category.
This structure allows the supplier to commit capacity and source raw material (advance), while giving the buyer leverage to require correction before releasing the balance (post-PSI, before shipment). It is the most common balanced structure in Indian exports.
Why milestone payments
100% advance to an unverified supplier is the single most expensive mistake in international sourcing. 100% on arrival is unrealistic for most Indian suppliers because they need to fund raw material and production. A milestone structure balances both sides.
Methods we work with
The right method depends on order size, supplier relationship and buyer risk profile.
Advance TT (Wire Transfer)
A direct bank-to-bank transfer, typically 30–50% of the order value, paid against the signed Proforma Invoice to start production. Funds the supplier's raw material and capacity commitment.
Letter of Credit (LC)
An irrevocable undertaking by the buyer's bank to pay on presentation of compliant documents. Used for larger orders or new-buyer relationships. LC terms must mirror the PI exactly.
Balance before shipment
The balance 50–70% paid after satisfactory pre-shipment inspection, against shipping documents or B/L copy — before the goods leave the supplier's premises.
Escrow (availability varies)
Third-party escrow services that hold buyer funds until agreed conditions are met. Availability and reliability vary by country and provider; less common in mainstream Indian export trade.
Why we ask for advance — honestly
Advance payment is standard practice in Indian exports for three practical reasons.
Supplier commitment. Without advance, a supplier has no commitment from the buyer and will not allocate capacity or block raw material. Advance converts an enquiry into a real order.
Raw material. Most Indian manufacturers do not hold large inventories of raw material. Advance allows them to purchase raw material specifically for the buyer's order — fabric for textiles, leather for footwear, spice lots for agro, steel for engineering goods.
Production funding. Indian factories typically cannot fund 100% of production cost on their balance sheet while waiting for balance payment. Advance plus balance before shipment is the standard balanced structure that allows production to start.
Advance risk is managed through supplier verification, written PI, registered bank account checks and — for larger orders — Letter of Credit instead of large advance.
How payment is tied to inspection and documentation
Each payment stage has a defined trigger and a buyer-protection mechanism. The Proforma Invoice is the binding document — read it carefully before any payment.
| Payment stage | What happens | Buyer protection |
|---|---|---|
| Advance payment | 30–50% of order value, paid against signed PI to start production. | PI is your contract — read it carefully. Pay only to the supplier's registered bank account in the name of the entity on the PI. |
| Pre-shipment inspection | Independent inspection before dispatch; report with photographs and pass/fail verdict. | Balance payment is tied to a satisfactory PSI report — gives the buyer leverage to require correction before paying. |
| Balance payment | Balance 50–70% paid against PSI report and/or shipping documents / B/L copy. | Buyer confirms quality and quantity via PSI before releasing balance; supplier ships only after balance is received. |
| Documentation | Full document set (CI, PL, COO, BL, COA) shared with buyer before originals are issued. | Draft documents are approved by the buyer — inconsistencies are caught before originals, preventing destination clearance delays. |
| Letter of Credit (if used) | Bank undertakes payment on presentation of compliant documents. | Bank-level security for both parties; payment released only when documents strictly comply with LC terms. |
Final terms are in the Proforma Invoice
The information on this page is general guidance only. Final payment terms for any specific order are subject to the Proforma Invoice, and depend on buyer profile, supplier terms, order size, inspection requirements and product category. Always read the PI carefully before transferring funds. This page is not legal or trade finance advice.
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