Supplier payment terms: what's standard, what's negotiable, and what signals where you stand

When you ask a factory for payment terms, they'll quote you 30/70. That's the opening position. The range actually extends further in both directions, but getting access to it requires understanding where you sit on the factory's risk spectrum. Show up as an unknown brand and you'll be offered 50/50. Show up as someone they've worked with multiple times and the terms shift. Where you land on that spectrum is signalled by what you've already demonstrated, not by what you promise.

Payment terms are a factory's risk management tool. They're not a negotiating favour. Every point of deposit they reduce and every point of payment deferral they extend means they're holding more working capital risk on your behalf. They'll do that in proportion to how confident they are that you'll complete the order, pay what you owe, and not become a problem.

The standard positions you'll see

30/70 (30% upfront, 70% at completion) is where most conversations start if you have some track record. 50/50 is the default for first-time orders. 70/30 or sometimes even 80/20 is what you see with genuinely unknown quantities or small orders where the factory's risk is proportionally higher. And occasionally you see net 30 or net 60 terms (full payment after shipment) but that requires significant foundational relationship or sometimes a letter of credit.

Cash on delivery, or COD, is rare for bag manufacturing but you see it if you're asking a factory to make something very non-standard or if you have zero history. These terms are essentially saying: "We don't know you, so you pay when the goods arrive."

The mistake most brands make is treating these terms as fixed negotiating positions. They assume 30/70 is the factory's ask and 0/100 (payment after you've sold the goods) is what they want. In reality, 30/70 is the baseline for a known quantity. The range both above and below that exists, and where you sit in the range depends on signals you've already sent.

What actually moves the needle

The single most valuable signal you can send a factory is: you've worked with someone else, you paid them on time, and they'll confirm that. A factory will check references. If your previous factory says you're reliable, the new factory will offer better terms because the previous factory has already absorbed your early-stage risk.

The second signal is: you have operational systems in place. You're not a founder making one-off decisions. You have a company structure, accounting, documented processes. That sounds boring, but factories care about it because it means there's institutional continuity. If the founder disappears, the company still pays.

The third signal is consistency. You place orders on a schedule. You provide forecast data. You give them reasonable lead times. You don't request changes late in the cycle. You pay invoices on the date you agreed. These are operational behaviours, not relationship-building tactics. They're what factories actually price risk against.

The signals that work against you are: you're secretive about your financial situation or your sales data. You've had disputes with previous manufacturers. You request expedited timelines and then extended payment terms (you're asking them to absorb your poor planning). You've cancelled orders before, even if you had legitimate reasons. You treat every interaction as a negotiation rather than a collaboration.

Letter of credit as middle ground

If you want better terms than your track record justifies, a letter of credit is worth exploring. That's a bank guarantee that says: the buyer will pay the seller when the invoice is presented, regardless of what else happens. It costs money (usually 0.5-1.5% of the order value) but it's a legitimate way to access better terms before you've built full trust with a factory.

A factory will often move from 50/50 to 30/70 or even 0/100 if you're willing to provide a letter of credit, because they're no longer bearing the payment risk. You're paying a bank to bear it instead. It's not free, but for some orders it's worth it.

Where the negotiation actually happens

The negotiation happens around specific situations rather than around the general terms number. "Can we defer 20% of the payment to net 30 days after shipment?" That's more specific than "can we get 30/70 terms?" and it's easier for a factory to say yes because they can model the 20% risk specifically. "Can we pay 50% at approved sample instead of 30%?" That's a real negotiation point because it shifts which stage you pay at, which changes their risk at different moments.

The worst negotiation approach is to ask for terms better than the factory has offered without providing context. A factory offers 50/50 and you counter with 20/80. They'll say no and they'll resent that you wasted their time with an unrealistic ask. A better approach is to explain why you want better terms and what you're offering in exchange. "We're planning multiple orders. If we can work on 30/70 terms, we'll commit to a rolling 12-month forecast and place orders on a monthly schedule." That's a negotiation that acknowledges their risk and offers something in return.

• 30/70 is the baseline for brands with some track record. 50/50 is the default for first orders.
• Your previous factory's reference is more valuable than any negotiating tactic you can deploy
• Consistency matters more than size. A small brand that pays on time gets better terms than a big brand that doesn't.
• Provide a letter of credit if you want better terms before you've built trust
• Ask for specific payment deferral points, not general better terms

The payment terms you get are a reflection of what you've already demonstrated. Don't spend energy negotiating positions. Spend energy building a track record. The first order is the audition. The second order is where the terms shift if you passed. By the fifth order with the same factory, you're working on terms that sound unrealistic to brands who haven't done that groundwork.