The credit trap
The single most damaging habit among Indian sellers — domestic or export — is extending goods on credit to chase turnover, without discipline about actually collecting payment. Revenue looks like it's growing on paper while cash flow quietly turns negative, and by the time it's obvious, the damage is done. A bigger order on bad payment terms is not automatically a better deal than a smaller order on solid terms — decide your acceptable payment terms in advance, and don't abandon that rule under pressure from an attractively large order size.
Payment structures, roughly in order of safety
Letter of Credit (LC) — a bank-to-bank guaranteed payment mechanism. The buyer's bank issues an LC to your bank; your payment is released according to agreed terms (for example, against shipped-on-board documents, or a fixed number of days after documents are handed over) once you present the required shipping documents. Two rules that matter:
- Never route LC-related documents outside the banking channel. If a buyer asks you to courier shipping documents (like the Bill of Lading) directly to save time, don't — all document handoff needs to stay bank-to-bank. That's what actually preserves the payment guarantee; going around it defeats the point of using an LC at all.
- Banks verify documents before releasing funds as part of the process — this is a feature, not friction; it's what makes LC the safer route.
Advance payment — get a portion of payment before production/shipment. New exporters generally should not expect 100% advance from a buyer; that level of trust is usually earned over time. A more realistic starting point is a partial advance (commonly in the 30–60% range), with the balance released against shipping documents.
What actually earns a buyer's trust (and advance payment)
Buyers extend more advance and better terms to sellers who demonstrate genuineness through concrete proof — clear product photos, documented specifications, and a sample — not through claims about years in business or past sales volume. Most buyers never even ask how long you've been operating; what they're actually evaluating is whether what you're showing them right now looks credible and consistent. Build the proof, and better payment terms tend to follow on their own — trying to negotiate better terms without that proof usually doesn't work.