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

That single paragraph answers the question most European buyers type into Google before their first Bangladesh order. What it doesnt 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 theyve technically "done it right." Thats what this guide covers.

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 youve 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 wont 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)

Letter of Credit (L/C)

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. Its occasionally used for very small sample or trial orders where the value at risk is low.

Open Account / Net Terms

Which Payment Structure Should You Use as a European Buyer?

There isnt a single right answer, it depends on order size, whether its your first order with a given supplier, and how much documentation confidence you need.

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:

The Documents That Should Accompany Every Payment

Regardless of whether youre paying by T/T or L/C, the same core documents should exist and be checked before funds move:

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.

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

L/C Terms That Dont Match the Purchase Order

No Written Recourse for Defects or Delays

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:

What to Ask Before You Send a Deposit

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

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

Frequently Asked Questions

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

What percentage deposit is normal for a Bangladesh garment order?

Should I pay the balance before or after inspection?

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.