If you’re in the export business, you’ve probably had that uneasy feeling: “What if my overseas buyer doesn’t pay?”
You’ve sourced the goods, packed them perfectly, booked the container—and now you’re waiting. Waiting for payment that may or may not come.
This fear isn’t unfounded. Non-payment is one of the biggest risks in international trade, especially when you’re dealing with new buyers in unfamiliar markets.
But here’s the good news: you don’t have to rely on luck or blind trust. There are three tried-and-tested payment methods that smart exporters use every day to protect themselves: Letters of Credit (LC), Telegraphic Transfer (TT), and Escrow Services.
Let’s break them down—in plain language, with real examples—so you can choose the right one for your next deal.
- Letter of Credit (LC): Your Bank as a Bodyguard
Think of a Letter of Credit (LC) as a promise from a bank: “If you deliver exactly what you agreed to—and prove it with the right documents—we guarantee you’ll get paid.”
Here’s how it works:
- The buyer asks their bank to issue an LC in your favor.
- You ship the goods and submit documents like the invoice, packing list, and bill of lading.
- If everything matches the LC terms, the bank pays you—even if the buyer backs out.
✅ Why exporters love it:
- Near-total payment security
- Ideal for first-time transactions or politically unstable regions (e.g., Nigeria, Bangladesh, or parts of Latin America)
- Builds confidence when dealing with unknown buyers
⚠️ But be careful:
- Banks are strict. Even a tiny typo error or a spell error or a date mismatch, won’t be acceptable and can be rejection.
- LCs cost more (1–2% in bank fees) and take longer to process.
Real-life tip: If the buyer’s bank is in a country with shaky banking regulations, ask for a “confirmed LC”—where your own bank adds a second guarantee. Yes, it costs a bit more, but it’s worth the peace of mind.
- Telegraphic Transfer (TT): Fast, Simple—but Trust-Dependent
Telegraphic Transfer (TT) is just a fancy name for a bank wire transfer. It’s the most common payment method—and also the riskiest if not used wisely.
There are two main ways TT is used:
- 100% Advance Payment
The buyer pays you before you ship anything. Great for you—but tough to convince buyers unless you have a strong brand or long history. - Open Account / Documents Against Payment
You ship first, and the buyer pays later—say, 30 or 60 days after delivery. Good for the buyer… but risky for you if they disappear.
✅ When TT works well:
- With repeat buyers you trust (e.g., your German client who’s ordered 5 times already)
- For small or sample orders
- When speed matters more than security
⚠️ The big danger:
If you ship on open account and the buyer refuses payment, recovering money across borders is nearly impossible—and legal action is expensive.
Smart compromise: Use a split TT—for example, 30% advance, 70% against copy of Bill of Lading. This shows commitment from both sides. Many Indian exporters use this model with buyers in the UAE, UK, or Southeast Asia.
- 3. Escrow Services: The Digital Middleman
New to many traditional exporters—but growing fast—is the Escrow service. Think of it like “Amazon’s payment protection” for B2B trade.
Here’s how it works:
- Buyer deposits money into a neutral third-party account (the escrow agent).
- You ship the goods and upload proof (e.g., tracking number, inspection report).
- Once the buyer confirms receipt (or the escrow platform verifies delivery), the money is released to you.
✅ Best for:
- Selling via online platforms (Alibaba, TradeIndia, Export Genius)
- New-age exports: software, machinery parts, or custom-made goods
- Buyers and sellers who’ve never met
✅ Benefits:
- No need for complex banking procedures
- Built-in dispute resolution
- Works even if the buyer has no LC facility
⚠️ Downsides:
- Fees are higher (typically 3–5%)
- Not all escrow providers specialize in physical goods—choose one that does (e.g., Escrow.com, TradeSafe, or Payoneer’s B2B Escrow)
Pro insight: Escrow is especially useful when you’re dealing with startup importers who can’t get bank credit for an LC but still want to prove they’re serious.
So—Which One Should YOU Use?
It depends on three things:
- How well you know the buyer
- The value of the order
- The risk level of the country
Here’s a quick guide:
| Situation | Best Payment Method |
| First-time buyer in Kenya | Confirmed LC |
| Repeat order from a Dubai client | 30% advance TT + 70% against B/L |
| Selling industrial spares via LinkedIn inquiry | Escrow |
| High-value order (over $50,000) with quality clauses | LC + third-party inspection |
| Sample order ($500) to a US startup | 100% advance TT via PayPal/Wise |
I’ve seen too many good exporters lose money—not because their product was bad, but because they skipped payment safeguards to “close the deal faster.”
Remember: a deal without secure payment isn’t a deal—it’s a gamble.
At Eximbizz, we always tell our clients: “Never let urgency override security.” Take that extra day to structure your payment terms right.
And if you’re ever unsure? We’re here to help. Whether it’s reviewing an LC clause, drafting TT terms, or choosing a reliable escrow partner, our team in Pune has guided hundreds of exporters through safe, smooth transactions.
Because in global trade, getting paid isn’t optional—it’s the whole point.
