A brand asks their factory for better payment terms: instead of 50% upfront and 50% on completion, they want 30/70. The factory says no. The brand asks why. The factory says "we need the deposit to secure capacity." The brand increases the order quantity. The factory still says no. The reason wasn't the order size. The reason was that the factory hadn't seen consistent reliability from this brand yet.
Better payment terms don't come from bigger orders. They come from demonstrating that you're predictable. That you don't cancel orders at the last minute. That you pay on time when you say you will. That you provide accurate forecasts so the factory can schedule your production without guessing. Predictable brands get better terms. Big brands that are unpredictable don't.
What "better terms" actually means
Standard terms for a first-time order are usually 50% deposit, 50% on completion (sometimes 50/50 split at shipment). Some factories work on terms closer to 30% deposit, 70% at shipping. A few will work on 0/100 (full payment on shipment) if you've built enough trust. Some will even work on 30/70 net 30 terms (payment 30 days after goods ship) but that's rare and requires significant relationship foundation.
Each step down in the deposit and up in the payment deferral makes a material difference to your working capital. The difference between 50/50 and 30/70 on a 5,000-unit order at £8 per unit (£40,000 total) is £10,000 of working capital freed up until completion. Over a year of multiple orders, that's the difference between needing external financing and self-funding growth.
The factories willing to offer better terms aren't being generous. They're managing risk differently because they have more confidence in you. That confidence has to be earned, and it's earned through operational behaviour, not through handshakes or relationship-building conversations.
What factories actually care about
From a factory's perspective, better terms mean more working capital tied up in your order until completion. They need to source materials, pay their team labour, and carry inventory. If they're giving you 30/70 terms instead of 50/50, they're financing the difference themselves. They'll only do that if they're confident you're not going to cancel, request massive revisions, or fail to pay.
The variables that demonstrate that confidence are: you've placed orders before and paid on time; you provide accurate demand forecasts so they're not guessing at your volumes; you give them multiple SKUs so you're not a one-off customer; you provide enough lead time that they're not rush-manufacturing your order; and you don't request large design changes once production is underway.
A small brand placing £10,000 orders consistently with accurate forecasts and on-time payment gets better terms than a large brand placing £100,000 orders irregularly with last-minute changes. Factories price risk differently than volume.
How to position yourself for better terms
On your first order, accept standard terms. Don't negotiate this. You haven't proven anything yet. The factory has no data on you. Use this order to establish a track record: deliver accurate samples feedback, pay on time, don't request changes after you've approved production, provide clear quantities and specifications upfront.
On your second order, you can start the conversation. Reference the first order. Tell the factory you're planning multiple SKUs in the upcoming months and you want to build a strong working relationship. Then ask: "On this order and going forward, can we move to 30/70 terms?" Frame it around your commitment to working together repeatedly, not around your need for better working capital terms.
Share your pipeline with the factory. Not your sales forecast (they don't need that), but your product pipeline. "In the next 12 months we're planning to launch four new styles. We'd like to work with you on all of them if the first order goes well." That changes the context from "this is one order" to "this is the beginning of a relationship." Factories will offer better terms for a relationship they see lasting years.
Commit to lead times. If the factory asks for a certain lead time for a particular style, give them that lead time and pay for it via deposit. Don't ask them for expedited production and then ask for extended payment terms. You're not reducing their risk, you're asking them to absorb all of it.
The mistake most brands make
They treat payment terms negotiation like price negotiation. They lead with: "We're a growing brand and we need better terms to manage cash flow." Factories don't care about your cash flow problem. They care about their cash flow problem. You're not going to negotiate your way to 30/70 terms by explaining why you need them. You're going to earn them by being operationally reliable.
The second mistake is thinking bigger orders will move the needle. Offer to increase the order to 10,000 units instead of 5,000 and ask for 30/70 terms. The factory still says no because the risk hasn't changed. You're still an unknown quantity to them, just with a bigger order. The deposit still needs to cover their material sourcing and labour. The risk that you cancel or fail to pay hasn't decreased.
- On first orders, accept standard terms. Use this order to prove reliability.
- Share your product pipeline so the factory sees you as a long-term partner, not a one-off customer
- Provide accurate lead times and respect them. Don't ask for speed and better terms simultaneously.
- Pay invoices on time, every time. This is the most valuable signal you can send a factory.
- Don't request changes after you've approved production. Factories don't move margins for brands that generate rework costs.
The brands we work with that have the best factory terms aren't the ones with the biggest orders. They're the ones who've placed multiple orders, paid consistently, and communicated like operators, not like people asking for favours. That's compounding. Do it right on order two and three, and by order five you're working on terms that your competitors think are impossible.
