Choosing the right payment method for a furniture order from China is not just a financial decision. It determines who carries the risk during production, how much cash is tied up before you see a bill of lading, and what leverage you retain if the factory delivers defective goods. The three most common methods are T/T (telegraphic transfer), L/C (letter of credit), and escrow services. Each has a different cost structure, a different risk profile, and a different sweet spot based on order size and buyer-supplier relationship.

This comparison breaks down the mechanics, costs, and risks of each method, with specific reference to how they work in the furniture sourcing context where production runs 30 to 45 days and the goods are custom-made to the buyer’s specification.

How T/T (Telegraphic Transfer) Works for Furniture Orders

T/T is the default payment method for most furniture imports from China. The buyer wires money directly from their bank to the factory’s bank account, typically through the SWIFT network. The transfer takes 2 to 5 banking days to clear, depending on the correspondent banks involved.

The standard T/T structure for furniture orders is:

• 30 percent deposit paid after the purchase contract is signed. The factory uses this to procure raw materials and schedule the production run.
• 70 percent balance paid after pre-shipment inspection passes and the goods are packed, but before container loading. The factory ships only after the balance clears.

The bank wire fee for an international T/T typically ranges from USD 25 to 50 per transfer, charged by the sending bank. The receiving bank in China may charge an additional USD 10 to 20 for incoming wire handling. For a USD 50,000 order, the total banking cost is roughly USD 60 to 100, which is negligible compared to the order value.

The key risk with T/T is that once the money leaves the buyer’s account, it is in the factory’s account. If the factory delivers defective goods, the buyer has limited recourse beyond the commercial relationship. This is why the 30/70 split is structured the way it is: the 30 percent deposit gives the factory enough cash to start production, while the 70 percent balance gives the buyer leverage to insist on quality before releasing the final payment.

The full picture of what can go wrong between the wire transfer and the container, including why a 50 percent prepayment raises your exposure, is in our guide to deposit risks in China sourcing.

For repeat orders with a trusted factory, some buyers move to a 50/50 or even 100 percent after-shipment T/T structure. But for first orders or custom designs, the 30/70 split is the industry standard and should not be negotiated away lightly. For a deeper look at how factory pricing works, see our analysis of how Chinese furniture factories price products.

How L/C (Letter of Credit) Works for Furniture Orders

A letter of credit is a bank guarantee that the factory will be paid, provided they present compliant shipping documents. These documentary credits are governed by the Uniform Customs and Practice for Documentary Credits (UCP 600), the rules maintained by the ICC Banking Commission. The buyer’s bank issues the L/C, and the factory’s bank confirms it. Payment is released when the factory presents the bill of lading, commercial invoice, packing list, and any other documents specified in the L/C terms.

The L/C process for furniture orders works as follows:

1. The buyer applies to their bank for an irrevocable L/C at sight, typically for 100 percent of the order value.
2. The buyer’s bank issues the L/C and sends it to the factory’s bank (the advising/confirming bank).
3. The factory produces the goods and ships them.
4. The factory presents the required documents to their bank.
5. The documents are checked against the L/C terms. If compliant, payment is released immediately (at sight) or at a specified future date (usance).

The cost of an L/C is significantly higher than T/T. The issuing bank charges an opening commission of 0.5 to 1.5 percent of the L/C value (minimum USD 100 to 200). The advising bank charges a confirmation fee of 0.5 to 2 percent. For a USD 50,000 order, the total L/C cost can be USD 500 to 1,750, which is 1 to 3.5 percent of the order value.

The main advantage of an L/C is that the buyer’s money is protected by the bank. If the factory fails to ship or presents non-compliant documents, the bank does not release payment. The main disadvantage is the cost and the rigidity: any discrepancy in the documents (even a typo on the invoice) can delay payment and trigger amendment fees of USD 50 to 100 per amendment.

L/C is most appropriate for orders above USD 50,000 to 100,000, where the risk of factory default is material and the buyer does not have an established relationship with the supplier. For smaller orders, the L/C cost erodes the price advantage of sourcing from China and is rarely worth it. For more on comparing factory quotes fairly, see our guide on how to compare quotes from Chinese furniture factories.

How Escrow Services Work for Furniture Orders

Escrow services hold the buyer’s payment in a third-party account and release it to the factory only when agreed conditions are met. Alibaba’s Trade Assurance is the most widely used escrow platform for furniture sourcing, though it is more common for small orders and ready-made products than for large custom projects.

The escrow process works as follows:

1. The buyer pays the full order amount (or a deposit) to the escrow platform.
2. The platform holds the funds and notifies the factory that payment is secured.
3. The factory produces and ships the goods.
4. The buyer confirms receipt and quality, or the platform’s automatic release timer expires (typically 15 to 30 days after shipping).
5. The platform releases the funds to the factory.

Escrow fees are typically 2 to 3 percent of the order value, charged to the seller (factory). But many factories build this cost into their unit price when selling through Alibaba, so the buyer may not see a separate fee. The advantage is strong buyer protection: if the factory does not ship or the goods do not match the listing description, the buyer can file a dispute and the platform mediates.

The limitation of escrow for furniture is that most large Foshan factories do not sell through Alibaba. They work directly with buyers via T/T. So escrow is most relevant for smaller buyers placing trial orders of USD 5,000 to 20,000 with factories that have an Alibaba storefront. For larger orders, the T/T 30/70 structure remains the norm.

T/T vs L/C vs Escrow: Head-to-Head Comparison

Factor	T/T (30/70)	L/C at Sight	Escrow (Alibaba)
Buyer risk	Medium (deposit at risk)	Low (bank-guaranteed)	Low (platform-held)
Bank/platform cost	USD 60 to 100 total	1 to 3.5% of order value	2 to 3% (seller-side)
Speed	2 to 5 days per transfer	7 to 15 days to issue	Instant to deposit
Document requirements	Minimal	Strict (exact compliance)	Platform-managed
Best for order size	Any size	USD 50,000+	USD 5,000 to 20,000
Factory acceptance	Universal	Large factories only	Alibaba-registered only
Dispute resolution	Bilateral negotiation	Bank-mediated	Platform-mediated
Custom design suitability	High (flexible terms)	Medium (rigid docs)	Low (listing-based)

Which Payment Method Should You Choose?

The choice depends on three factors: order size, relationship maturity, and risk tolerance.

For first-time orders under USD 20,000: Use T/T 30/70 if the factory accepts it. If the factory has an Alibaba storefront and you want extra protection, use Trade Assurance escrow. Avoid L/C because the bank fees will eat into your margin.

For first-time orders between USD 20,000 and 50,000: T/T 30/70 remains the standard. The deposit is manageable, and the 70 percent balance gives you inspection leverage. If the factory insists on 100 percent upfront, walk away or use escrow.

For orders above USD 50,000: Consider an L/C at sight if you do not have an established relationship with the factory. The bank guarantee is worth the 1 to 2 percent cost for large orders. If you have done multiple successful orders with the factory, T/T 30/70 is fine regardless of order size.

For repeat orders: T/T is the default. Many buyers negotiate 20/80 or even 10/90 terms after several successful orders, reducing their deposit risk. Some buyers move to open-account terms (net 30 or net 60 after shipment) for their most trusted suppliers.

Before you commit to a payment structure, our team can confirm what Foshan factories in your product category actually accept. Send your specification through our contact page and we will come back with a quotation plan.

Red Flags in Payment Terms

Regardless of which method you use, watch for these warning signs:

• 100 percent deposit demanded upfront. No legitimate furniture factory needs full payment before starting production. This is either a scam or a sign of severe cash flow problems.
• Payment to a personal bank account. The payment should always go to the factory’s corporate bank account. Payment to a personal account offers no legal recourse if something goes wrong.
• Refusal to use L/C for large orders. If the factory will not accept an L/C for a USD 100,000 order, they may not have the financial stability to complete production.
• Pressure to pay the balance before inspection. The balance should be paid after the pre-shipment inspection passes, not before. If the factory demands the balance before you can inspect, this is a major red flag.

For a practical guide to vetting suppliers before committing any payment, see our article on 12 questions to ask when choosing a furniture sourcing agent.