Payment Terms with Indian Suppliers: LC, TT, and PayPal Compared

Choosing the right payment method protects both you and your supplier. Each method offers different levels of security, cost, and convenience.

Bank Transfer (T/T)

The most common method for India B2B trade. Wire transfer directly to the supplier's bank account. Fast (1-3 days), relatively low cost ($15-40 per transfer). Risk: you're sending money before receiving goods. Mitigate by using staged payments (30% advance, 70% against documents).

Letter of Credit (L/C)

A bank guarantee that payment will be made when specific conditions are met (usually shipment documentation). Most secure for both parties. More expensive ($200-500 to set up) and requires more paperwork. Best for: large orders, new supplier relationships, and when trust hasn't been established.

PayPal

Rarely used for Indian B2B trade — most Indian manufacturers don't accept PayPal for export orders. The fees are high (3-4%) and chargebacks are a concern for suppliers. Use only for small sample payments if the supplier accepts it.

Recommended Approach

For first orders: 30% T/T advance, 70% T/T against copy of Bill of Lading. For established relationships: 30% advance, 70% against shipping documents. For large orders: Letter of Credit. Never pay 100% advance for production orders.