Are you buying goods from China? You will find that many sellers have different payment terms and methods.
In the short post, we are going to look at two things. They are as follows:
- The payment terms (deposit, full payment upon delivery, cash payments, and so on)
- The payment methods that you should choose when buying inventory from China
Best payment terms when ordering stock from China
Before you can buy anything in China, you need to find out the supplier’s payment terms you want to work with.
Here’re some of the most common payment terms:
Suppliers in China will need you to pay a deposit of at least 30 percent before they can start working on your order. They will not bother you if you don’t pay the deposit.
Paying a deposit puts you at risk, but it is a small risk. The seller wants to cut the risk on their side since they are letting you have the goods.
Payment in advance
This is not popular with many buyers. When you go to China, it is a seller’s market. Some suppliers might need you to make the complete payment in advance. Only then can they start processing your order.
This usually happens when you get a new supplier, and there is no rapport between you. In such a case, you should start with small orders. As you establish more fellowship with the seller, you can increase your demand.
Pay 5 to 10% for the sourcing agent.
Navigating the market in China can be challenging for a beginner. You might order inventory from a seller and get low-quality items. Most people prefer to use a sourcing agent for a fee to avoid this.
The payment terms are usually 5 to 10%. This differs depending on the agency and the product you want to buy. It should not exceed 10 percent on the high side.
The agency retains the payment for the inventory. They will do this until the supplier provides goods of good quality. If they do not meet the quality, the agency can reject the goods. They keep the money to refund it to the buyer or get inventory from another supplier.
Best payment methods and terms for your business
If you want high-quality inventory at low prices, you know where to find the world’s factory floor – China!
When you are buying from China, there are many challenges. You need to identify them. Find a way to navigate them to get the best deals.
When you get to a wholesaler’s website, the first thing to check is the payment methods they support.
There are several ways to pay your supplier in China. Not every one of them is good for you. The most important thing is to compare many of them side by side.
Some of the things you need to look at include the cost of using that service and its efficiency. The business has a fast pace, so you want payments to reflect as soon as possible.
Before choosing a payment method, ask yourself a few crucial questions. Does it offer any chances of refund if you pay a deposit and the seller fails to deliver?
When choosing a suitable payment method for your business, these are a few considerations to consider.
What Method Should You Use To Pay Your Supplier in China – 7 Methods
The payment method you can use to pay your supplier in China depends on the supplier.
It is better to check out the methods they say you can use. If one way does not work in your country, you might want to look for another supplier.
You should not worry too much about fraud. In China, such crimes attract severe punishment. The only things to worry about are low-quality goods or delayed shipping.
1. International Wire Transfer (Telegraph Transfer)
This is downright the most popular method for paying your suppliers in China. However, this does not mean it is the best because it has its downsides. At the same time, it does not mean the payment method is not safe.
When doing a telegraph transfer, you have to go to your local bank, or you can make the payment online.
When your supplier insists on a deposit payment, this leaves you at the risk of losing this money. When you are a new buyer, no supplier will agree to start packaging goods for you without a deposit.
Do you feel comfortable using this method? You should wait until you establish a good rapport with your suppliers.
You need to be aware that there will be some changes. These are in foreign exchange, and the Forex charges might be several.
When calculating your cost for buying your inventory, including the foreign exchange fees.
There is one best thing about using this method. Many suppliers in China accept it, so you can conduct business fast.
2. Letters of credit
If you are looking to buy goods with a large value, you might consider using letters of credit to make payment.
They’re safe for both the seller and the buyer. The seller is sure that they will get their money. The buyer is confident of getting the goods in the quality they want.
There are high fees that the parties have to pay and complex paperwork. The letters of credit are good for payments involving large transactions. For smaller amounts, you are better off using PayPal or Escrow.
If you are wondering what a letter of credit is, this is a form of guarantee from a bank. It assures the seller that the buyer will pay the seller.
The letter of credit is a guarantee between a bank, its customer (you, the buyer), and a beneficiary (seller in China).
The buyer’s bank issues and the letter of credit. Letters of credit have more recognition in international trade. This makes them perfect for paying for inventory in China.
3. Escrow payment
This is one of the best methods for both the seller and the buyer. It is also the safest. Before you opt to use it, discuss who will foot the escrow payment.
In some cases, the buyer has to pay the escrow fee. In other cases, the seller and the buyer can split the fees 50-50.
What happens when you use the Escrow payment method? Once you choose the escrow service, you can make the whole payment and describe what it is for.
You have to make the full payment to a third-party company that offers the escrow service. The most popular one in the world’s escrow.com, but many others.
The escrow service holds the payment until you receive the goods. You can ensure that they are of the quality that you want. The escrow company will then release the cost to the seller.
There are so many benefits of using this method. There are some downsides too. Most companies offer the service charge about 5 percent of the total transaction.
Another downside is that the supplier might have to wait too long to receive their money. Many sellers, especially those supplying expensive goods, do not like using this one.
The more money you have to pay, the higher the escrow fee. The escrow company charges the supplier the price. The supplier will pass the charge to the buyer, raising the inventory cost.
4. Western Union – Perfect for small and medium transactions
Western Union is famous, efficient, and available all over the world. It is best for small to medium transactions.
There are some risks with this method. One of them is that if you get goods of inferior quality, there is no means to get your money back.
To prevent this, it is best to use this payment method only with the suppliers you trust. Most suppliers prefer to use this payment
5. PayPal – Convenient and cheap payment method
PayPal’s one of the biggest payment gateways in the world. It is best for small to medium transactions like Western Union and escrow.
If this is the only payment method available to you, ask whether the supplier accepts it. Many Chinese suppliers do not accept PayPal.
PayPal has a tendency to withhold funds that raise even the smallest flags. Dispute resolution takes too long, and it might even lead to the closure of your account.
6. Cash payment terms
This is one of the most popular payment terms for the seller but not for the buyer. If you attend a trade fair or YIWU Market and buy items, cash is the best payment option.
Cash payment is quite risky for anyone. If the supplier delivers inferior quality goods, there is no way to file a dispute.
Exchanging foreign currency in China can be costly, and these costs fall on you. Only use cash if it is the last option remaining.
7. Debit and Credit Cards
Credit card payment terms are not so friendly to sellers and buyers. Sellers face the risk of fraud that can cost them a lot of money. Buyers face the high costs of processing credit card payments.
Many suppliers do not accept credit and debit cards as part of their payment terms. As a buyer, only use credit cards if it is the only option remaining.
Do as the Romans do when you go to Rome. If you buy inventory in China, do what the supplier says.
You would have no choice but to use their payment terms. If they do not have many payment options, move on to another supplier.
Choose a supplier who asks for a deposit rather than one who asks for full payment beforehand. This way, there is less risk for you.
If all else fails, you can consider a sourcing agent who charges a fair commission. This takes care of a whole lot of trouble for you.