Need your suggestions & advice. Here is the story:


We are garment supplier. One of our old clients from UK wants to change the payment terms from T/T to L/C 90 days. When we work with T/T, this client makes payment like this: 30% advance payment, 60% against the copy of B/L and 10% is paid 20 days after receipt of goods. We have done a few deals with them and no problem happened. 


Now they would like to change the payment terms to L/C 90 days. As far as I know, L/C is safe to some extent.


The problem is that we are tight in flow capital. Working with L/C means that we have to pay material cost and labor cost etc in advance, and that will kill us for big orders to come. however, we do not want to lose this customer.


So what can we do now??

You may get a liquidity credit against the L/C.

Also you may try to agree with the client in 30% advance payment and the rest with L/C in 90 days.

I think your customer has the same problem with liquidity as you have. If you consider that he must pay 90% of the price months before he gets to see his goods you can understand him.


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Quoting from [Kevin Li]:




Need your suggestions & advice. Here is the story:





We are garment supplier. One of our old clients from UK wants to change the payment terms from T/T to L/C 90 days. When we work with T/T, this client makes payment like this: 30% advance payment, 60% against the copy of B/L and 10% is paid 20 days after receipt of goods. We have done a few deals with them and no problem happened. 





Now they would like to change the payment terms to L/C 90 days. As far as I know, L/C is safe to some extent.





The problem is that we are tight in flow capital. Working with L/C means that we have to pay material cost and labor cost etc in advance, and that will kill us for big orders to come. however, we do not want to lose this customer.





So what can we do now??

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In the long run, some sensitive policies of a company need to be fixed really, especially the payment terms. Why can't he keep the same terms as he could accept it initially? Try to persuade your customer into paying in the same way, to keep your company in a positive position.

Quoting from [Kevin Li]:


Need your suggestions & advice. Here is the story:



We are garment supplier. One of our old clients from UK wants to change the payment terms from T/T to L/C 90 days. When we work with T/T, this client makes payment like this: 30% advance payment, 60% against the copy of B/L and 10% is paid 20 days after receipt of goods. We have done a few deals with them and no problem happened. 



Now they would like to change the payment terms to L/C 90 days. As far as I know, L/C is safe to some extent.



The problem is that we are tight in flow capital. Working with L/C means that we have to pay material cost and labor cost etc in advance, and that will kill us for big orders to come. however, we do not want to lose this customer.



So what can we do now??

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It is better to keep the old payment term as agreed, first ,it is safe and effective to both party--win-win deals as you have done; second, it is not good to go for a L/C 90, esp for a big order; third, there is a big risk on exchange rate and the rise of material cost in China.

You can forward those ideas to the old clients, I think he/she will understand....

Quoting from [Kevin Li]:


Need your suggestions & advice. Here is the story:



We are garment supplier. One of our old clients from UK wants to change the payment terms from T/T to L/C 90 days. When we work with T/T, this client makes payment like this: 30% advance payment, 60% against the copy of B/L and 10% is paid 20 days after receipt of goods. We have done a few deals with them and no problem happened. 



Now they would like to change the payment terms to L/C 90 days. As far as I know, L/C is safe to some extent.



The problem is that we are tight in flow capital. Working with L/C means that we have to pay material cost and labor cost etc in advance, and that will kill us for big orders to come. however, we do not want to lose this customer.



So what can we do now??

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    you can use usance L/C payable at sight, it means you can get the money in time and your client can pay to the bank later, of course with the interst, have a try, maybe your customer will agree.Good luck!

Quoting from [Kevin Li]:


Need your suggestions & advice. Here is the story:



We are garment supplier. One of our old clients from UK wants to change the payment terms from T/T to L/C 90 days. When we work with T/T, this client makes payment like this: 30% advance payment, 60% against the copy of B/L and 10% is paid 20 days after receipt of goods. We have done a few deals with them and no problem happened. 



Now they would like to change the payment terms to L/C 90 days. As far as I know, L/C is safe to some extent.



The problem is that we are tight in flow capital. Working with L/C means that we have to pay material cost and labor cost etc in advance, and that will kill us for big orders to come. however, we do not want to lose this customer.



So what can we do now??

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to check the 90 days's interest ,and add this cost to the price ,then get the LC ,when get the LC you can go to bank to take the money earlier ,it means you sell the LC to the bank ,they will take money from customer late ..

 

 

So, what is the trouble? You as a seller, you want to get paid 90% of the money before you even ship the goods. That is not fair to the buyer because they end up funding your factory. You should be able to have on hand and ready to ship your everyday goods and get paid with L/C wither upon bill of lading or upon arrival of goods at destination port. You should get paid up front and deposit for abnormally large orders, or for custom work. That is how most of the planet works. China factories have not yet caught on to this economic reality.

The most fair is to get LC payment upon showing bill of lading. This way the client has his goods on the way and you get your cash when you ship.

If you need money before you ship, you should get LC to your bank and borrow money against it.

Re: Help!!! Payment Trouble with my old client

You may get a liquidity credit against the L/C.


Also you may try to agree with the client in 30% advance payment and the rest with L/C in 90 days.


I think your customer has the same problem with liquidity as you have. If you consider that he must pay 90% of the price months before he gets to see his goods you can understand him.

 

Agree with this suggestion. It is based on the believable and understandable between you and the customer.

Re: Help!!! Payment Trouble with my old client

You may get a liquidity credit against the L/C.


Also you may try to agree with the client in 30% advance payment and the rest with L/C in 90 days.


I think your customer has the same problem with liquidity as you have. If you consider that he must pay 90% of the price months before he gets to see his goods you can understand him.

 

Agree with this suggestion. It is based on the believable and understandable between you and the customer.

Quoting from [Kevin Li]:


Need your suggestions & advice. Here is the story:



We are garment supplier. One of our old clients from UK wants to change the payment terms from T/T to L/C 90 days. When we work with T/T, this client makes payment like this: 30% advance payment, 60% against the copy of B/L and 10% is paid 20 days after receipt of goods. We have done a few deals with them and no problem happened. 



Now they would like to change the payment terms to L/C 90 days. As far as I know, L/C is safe to some extent.



The problem is that we are tight in flow capital. Working with L/C means that we have to pay material cost and labor cost etc in advance, and that will kill us for big orders to come. however, we do not want to lose this customer.



So what can we do now??

 

I think if you the customer has been paying you well in the past, the you may take some precautions and go ahead with the usuance LC.

1) You can Check the credit rating of the LC advising bank from your own bank.

This will safe gaurd you against any problem with the banks credibility for paying you at time of maturity period.

2) You can book the currency rate with your bank at time of accepting the LC.

This will safe gaurd you from all the currency flatuations in your country.

3) You can get your discounted through your bank at very nominal rate of interest and get cash against the LC.

This will solve your liquidity problem.

4) you can go in for commercial risk insurance policy to safe gaurd your commercial risk of non payment by the buyer in rare case.

You must get a confirmed LC if you still have any doubts.

Also You must try to put yourself in the buyers shoe to know about their risk, when they are giving you downpayments upto 90% without even seeing the goods.

When they dont complain, then I think with LC in Hand, you have greater security and sureity.

I hope this will help you