Export Payment Terms: A Guide for New Indian Exporters
Understanding payment terms is one of the most important parts of starting an export businesses . Many Indian exporters in the past have suffered losses because they did not focus on payment security. Some even shut down their businesses due to non -payment issues.
Today, the Indian government encourages exports and supports new exporters with training, documentation assistance, and financial schemes. Even with this support, exporters canb be understood how payment terms work and which options offer the best security.
This guide explains the most common payment terms and what new exporters should consider before finalizing a deal.
- Letter of Credit (L/C)
A Letter of Credit is one of the safest and most reliable payment methods for Indian exporters . It is a commitment issued by the importers bank that guarantees payment if the exporter fulfills the terms stated in the LC.
Some exporters hesitate to accept L/Cs, because they find the conditions complicated or the bank charges high. However banks can explain each clause and help exporter meet the requirements. Once you understand the process, L/C becomes a strong and secure option.
For new exporters, L/C is highly recommended,because it reduces payment risk and offers assurance backed by banks.
- Partial Advance Payment
Partial advance is another suitable option for beginners. Exporters may request around 30 percent advance before shipping the goods, This creatse a sense of security and ensures the importer is serious.
The remaining amount should only be settled when the exporter still has control over the shipments . Exporters can release original documents or surrender the cargo once after the balance payment reflects in their bank account.
Some importers may request advance against the documents and ask to pay the balance on arrival . It is better to avoid such terms as they expose new exporters to unnecessary risks.
- Credit Terms
Payment terms that involve credits are highly risky for new exporters. Importers may sound friendly and convincing, but credit based transactions can easily lead to payment delays or defaults. Until exporters gain experience, it is safer to avoid credit terms entirely.
Conclusion
These are the most common payment terms used in international trade. For new Indian exporters, L/C and partial advance are the safest choices. Understanding the conditions in an L/C and following proper documentation can help prevent disputes or losses.