What are the payment terms of Chinese sweater factories?

Hey there, if you’re a retailer, brand, or someone looking to source sweaters from Chinese factories, you’ve probably wondered: what actually are the payment terms most factories here go with? I’ve been in the sweater game for over a decade now, running a mid-sized factory in Guangzhou (that’s where most of China’s knitwear action’s at, fwiw) and dealt with hundreds of international buyers, so I can break this down straight—no corporate jargon, just real stuff that actually works.

First, let’s get one thing straight: payment terms aren’t one-size-fits-all here. It depends on how new you are as a buyer, your order size, how established the factory is, and even the type of sweaters you’re getting. For example, if you’re ordering a simple, fast-turnaround piece like the [Long Simple Pocket Sweater] that’s made of basic cotton, terms might be way different than a custom knit cardigan with a unique pattern. I’ll dive into that later, but first, let’s cover the most common terms you’ll see thrown around.

The big one every factory uses, especially for first-time buyers, is T/T (Telegraphic Transfer) with a 30% deposit and 70% before shipment. Wait, let me translate that for anyone who doesn’t know: T/T is just a bank wire transfer, super common worldwide for international trade. The 30% deposit is non-negotiable for most factories when you’re new. Why? Because factories have to front costs for yarn, labor, and packing materials. If a buyer bails last minute after we’ve already bought wool or hired knitters, that 30% covers half our lost costs. I’ve seen too many buyers think they can push for lower deposits, but for Chinese sweater factories, that’s the baseline. Even if your order is small, say 500 units, we can’t cover all the upfront costs ourselves. Now, once the deposit’s paid, we start production. We’ll send you photos or videos of the sample, then a production update halfway through, and once the sweaters are done, we do a pre-shipment inspection. That’s when you pay the remaining 70%, and we book shipping—you don’t get to see the sweaters before paying the balance, but we’ll never ship defective stuff. We stand by our quality, but we also can’t take the risk of shipping a 20ft container worth of sweaters without guaranteed payment.

Wait, what about L/C (Letter of Credit)? That’s another big term, mostly used for bigger orders or established buyers. An L/C is a guarantee from your bank that they’ll pay the factory once we present the shipping documents, like the bill of lading. We love L/Cs for repeat customers because it eliminates the risk of non-payment. But for first-time buyers, L/Cs are a pain—your bank charges fees, and there’s a bunch of paperwork. Most Chinese sweater factories will only do L/C if the order is over, say, $10,000. If you’re a small retailer ordering 1,000 units of the [Casual Striped Women's Cardigan] which retails for around $20, an L/C is way too much hassle for both of us. Stick to T/T if you’re just starting out.

Now, let’s talk about exceptions—because there are definitely times you can negotiate better terms. First, if you’re a repeat buyer. If you’ve placed 3 or 4 orders with us before, paid on time, and your order size goes up, we might drop the deposit to 20%. I once had a buyer who ordered 5,000 units of the [Women's Spring Summer V Neck Jumpers Knitted Sweater] three times in a row; we shifted to a 15% deposit and 85% before shipment. But that’s only if you’re reliable. No factory will cut you a break if you’ve been late paying before.

Another exception: custom orders vs. ready stock. Wait, most factories hold some ready stock, but if you’re asking for a custom knit—like a specific stitch, a unique color, or adding your logo to the [Long Chunky Knit Cardigan]—the deposit is usually 50% up front. Custom stuff is way riskier because we can’t resell it if you back out. A basic striped sweater is generic, but a custom cardigan with your brand’s logo? We can’t just flip that to another buyer. So that higher deposit makes total sense. I’ve had buyers get mad when I ask for 50% for a custom order, but it’s not to be a jerk—it’s to cover the cost of sample development (we spent 10 hours making your sample, that’s not free) and the yarn we have to order just for your batch.

What about COD? No, that’s a hard no for Chinese sweater factories. COD (Cash on Delivery) means you pay when the sweaters arrive at your port. We’ve been in this game long enough to know that buyers often disappear when the container is on the water. Even if you have a great credit score, we can’t afford to risk losing $50k+ on an order. I’ve seen a few small factories try COD for super small orders (under $1,000), but that’s rare. Most won’t touch it.

Now, let’s talk about the hidden stuff in payment terms that most buyers miss. First, payment deadlines. If you pay the 70% balance after we’ve already booked the shipping, that can cause delays. Shipping lines charge extra for last-minute changes, so we need you to pay 3-5 days before the sweaters leave the port. If you pay late, your order gets pushed back, and we can’t be responsible for rush fees. Second, currency. Almost all our international deals are in USD, but if you’re using EUR or another currency, the exchange rate risk is on you. We won’t cover that—so if the dollar drops 5% between you placing the order and paying the balance, you’re the one who has to make up the difference. That’s a standard clause, but it’s good to know so you don’t get sticker shock when the final payment comes.

Wait, what about deposits being refundable? No, almost never. The deposit is a confirmation that you’re serious about the order. If you cancel after production has started, we keep the deposit to cover our costs. If you cancel before production starts, we might refund 50%, but that’s only if we haven’t already ordered yarn or done samples. I once had a buyer cancel a [Contrast Stripe Lazy Sweater] order two weeks before we were supposed to start—we’d already bought the yarn, so I only refunded 20% of the deposit. It’s not personal; it’s just business.

Also, let’s talk about small orders vs. big bulk. If you’re a dropshipper ordering 100 units, the deposit might be higher—like 40%—because the order is small, so our fixed costs (admin, packaging, shipping for samples) are a bigger chunk of the total. If you’re a big brand ordering 50,000 units, we might even offer net terms—like 30 days after delivery. But that’s only for big, loyal clients. We’re not gonna give net terms to someone who’s never ordered from us before.

Wait, let’s make this relatable. If you’re a boutique retailer in the US wanting to order 1,500 units of our [Long Simple Pocket Sweater], here’s how that’d go: you send an inquiry, we send a sample, you like it, we say 30% deposit via T/T to confirm. You pay $1,500 (30% of $5,000 total), we start production. 2 weeks later, we send you a production update, then once they’re done, we do a 3rd-party inspection (super standard, most buyers ask for this). You pay the remaining $3,500, we book shipping, you get the sweaters in 25-30 days. That’s the most common scenario for first-time buyers.

Now, let’s address the stuff that’s a scam. If a factory asks for 100% payment up front, run. That’s a red flag—legitimate factories don’t need all the money before production. They might take your money and never deliver, or send garbage sweaters. On the flip side, if a factory offers 0% deposit, that’s also a red flag. They’re probably cutting corners on costs, or they’ll pressure you into paying more later. Stick to the 30/70 rule, that’s the sweet spot.

Another thing: payment methods. T/T is the easiest for both sides, but we also accept PayPal for small orders. PayPal’s fees are a bit higher, but if you’re ordering under $1,000, it’s way faster than a bank wire. For bigger orders, though, T/T is better because it’s more secure. We’ve had issues with PayPal chargebacks, so for orders over $1,000, we only do T/T.

Wait, what about customs? No, the payment terms don’t cover customs duties—those are your responsibility, as the importer. That’s another common misunderstanding. The 70% balance is for the sweaters themselves, packaging, and shipping to your port. You have to pay for customs, taxes, and any port fees on your end.

Let’s wrap this up with what I think is the most important tip for first-time buyers: be transparent. If you’re new, tell the factory upfront. We’re way more flexible with terms if we know you’re a first-timer who’s serious, not just testing the waters. If you act like you know everything but don’t, factories will dig in their heels on deposit amounts. Also, communicate early if you have any issues—if you can’t pay the balance on time, tell us at least a week before the deadline, not the day before we’re supposed to ship. We can sometimes rearrange, but only if we know in advance.

At the end of the day, Chinese sweater factories aren’t out to rip you off. We’re small businesses (well, most of us are) that rely on repeat buyers, so we want your order to go smoothly. The payment terms are just a way to manage risk on both sides. If you’re ready to talk specifics, reach out directly—we’re here to answer your questions, no sales pitch, just real info for your sweater order.

References

1. China Customs Statistics 2023: Knitwear Export Payment Terms Survey
2. National Federation of Garment Factories (China) Trade Practice Guidelines
3. Global Trade Review: Small Business International Payment Trends 2024
4. Guangdong Knitwear Industry Association: Supplier-Buyer Negotiation Best Practices