Custom Bag Deposit and Payment Terms: TT, LC and Trade Assurance Explained for Creators

Money moves before bags do. On a custom bag programme the payment schedule is the document that decides whether your campaign ships on the date you promised backers, because it determines when fabric is bought, when the line is booked, and how much room you still have to correct a sample. Most creators negotiate unit price for weeks and then accept whatever payment structure arrives in the final email. That is backwards. This guide sets out how deposits, T/T, letters of credit and platform escrow actually work on a bag programme, what each one protects, and the wording to ask for. If you are still comparing partners, start with the bag manufacturing guide for campaign creators and come back to the money.

Why payment terms decide whether a campaign ships

A payment schedule is a production plan written in cash. The deposit is not a booking fee; it is the money that releases fabric, webbing, zips and labels from mills and hardware houses, and those upstream suppliers do not start dyeing or plating until they are paid. On a programme with a 35-50 day bulk window after sample approval, the clock starts at deposit clearance, not at the date you signed. If your deposit clears on the 10th of the month instead of the 1st, delivery slides by roughly the same number of days, and your backer update slides with it.

Payment terms also decide how much leverage you hold when something goes wrong. A 30/70 structure leaves 70 percent unpaid until the goods are finished and inspected, which is the point at which you can still refuse. A structure asking for 80 percent before production leaves almost nothing to negotiate with if the first article comes back with the wrong webbing shade. Creators should think of the unpaid balance as the only quality lever they own, and should design the schedule so that the largest balance sits behind the inspection gate rather than in front of it.

There is a second, quieter cost. Crowdfunding money arrives in a lump and leaves in instalments across many months. If your platform payout lands in month one, your deposit is due in month one, and the balance is due in month four, you have to hold that cash while also paying for photography, freight, duty and fulfilment. Matching the payment schedule to your pledge cash curve is as much a treasury decision as a sourcing one, and it is worth modelling on a spreadsheet before you agree to anything.

• When mills release fabric, because most dye houses require payment before a dye lot is started
• When a line slot is reserved, because production planning books capacity against confirmed orders only
• When you can still walk away, because the unpaid balance is your only practical leverage on quality
• How much working capital you must hold between the pledge payout and the final balance date

The four payment methods a creator will meet

In practice a creator will be offered one of four mechanisms: a telegraphic transfer, a letter of credit, platform escrow such as Trade Assurance, or a consumer style transfer through a card or wallet. Each has a different cost, a different speed, and a different answer to the only question that matters: if the goods are wrong, who is holding the money when you find out?

Read that table as a trade-off between speed and enforceability. T/T is fast, cheap, and it is what most bag programmes run on, but it protects you only through the contract sitting behind it. A letter of credit is slower and costs real money, and it shifts the risk from trust to documentation. Escrow is the cheapest protection available for a first order with a partner you have never met, provided you understand precisely what the platform will and will not adjudicate.

One distinction matters more than any other on this page. A payment method is not a payment term. T/T describes how the money moves; 30/70 describes when it moves. A partner can offer T/T with a fair 30/70 split, or T/T with 100 percent upfront, and those are completely different risk positions wearing the same label. Always negotiate the two separately and write them as two separate lines in the order confirmation, so that a later change to one does not silently change the other.

T/T in practice: what a 30/70 structure means

T/T, or telegraphic transfer, is a straight bank to bank wire. On custom bag programmes the common structure is 30 percent deposit with the order confirmation and 70 percent balance against a passed inspection before shipment, which is the structure we quote as standard on FOB Xiamen orders. It is popular because it suits the way a campaign collects money: a relatively small amount is needed to start the work, and the large amount falls due around the time the pledge money has already landed.

1. You approve the pre-production sample and both sides sign the order confirmation
2. You transfer 30 percent and send the bank receipt, because clearance takes one to three working days
3. Materials are released and the line slot is booked against a confirmed order
4. production 35-50 days from material availability
5. Inspection is carried out to AQL 2.5 under ISO 2859-1
6. You transfer the 70 percent balance against the passed inspection report
7. Goods are released to the carrier at FOB Xiamen

Two details in that sequence are worth defending in writing. First, the balance should be due against a passed inspection report, not against a shipping notice. If the trigger is a shipping notice you are paying before you have seen the inspection result, and you lose the one lever that makes AQL 2.5 meaningful. Second, ask that the inspection report be issued before the balance invoice rather than alongside it. A partner who sends both in the same email is asking you to pay on trust at exactly the moment you should be paying on evidence.

Bank details deserve their own paragraph. Wire fraud on first orders is real, and the standard attack is an email changing the account number a day before the deposit is due. Verify any change of bank account by voice or video call, and ask that bank details appear in the signed contract rather than only in email threads. Our contract basics guide covers the exact clauses to include, including the one that makes the balance conditional on inspection rather than on a date.

Letters of credit: when the bank fee is worth it

A letter of credit is a bank promise to pay the beneficiary against a set of documents. It is the most formal instrument available to a small buyer, and for orders above roughly 50,000 USD it deserves serious consideration. Below that level, the fees and the documentary workload usually outweigh the benefit, and a well written contract plus escrow gets you most of the protection for none of the cost.

Here is what an LC actually changes. Under T/T you pay because you trust the relationship and the contract. Under an LC your bank pays because the documents presented match the credit terms: a commercial invoice, a packing list, a bill of lading, and often an inspection certificate from a named third party. If the documents do not match, the bank does not pay. That moves any dispute from a relationship argument to a documentary one, which is far easier to win and far less personal.

The cost is real and it is not only the fee. Expect issuance at roughly 0.15 to 0.5 percent of the credit value, an advising fee at the beneficiary bank, and courier plus amendment charges every time something changes. An amendment on a hurried campaign typically costs 60 to 120 USD and takes several days to confirm. If your specification is still moving, an LC will punish you for every change, which is a bad fit for a programme that is still in sampling.

• Use an LC when the order value is large enough that the fee is a rounding error
• Use it when your specification is frozen and unlikely to change before shipment
• Use it when you want a third party inspection certificate to be a condition of payment
• Skip it when the order is under about 50,000 USD
• Skip it when the tech pack is still being revised
• Skip it when your timeline cannot absorb five to ten working days just to open the credit

Trade Assurance and escrow: coverage limits

Platform escrow, best known through Alibaba Trade Assurance, holds your payment with the platform and releases it to the seller after shipment or after you confirm receipt. For a creator placing a first order with a partner they have never met, it is the cheapest protection on the table and it should be the default for any order under about 30,000 USD. It costs you nothing and it forces the order details into writing, which is valuable even if you never make a claim.

What it covers is narrower than most creators assume. It covers non shipment after the agreed date and quality that fails the standards written into the order. It does not cover subjective dissatisfaction, changes you approved after the fact, or anything discussed only in chat. The coverage follows the paperwork. If your order text says backpack with black webbing and the goods arrive with black webbing, you have no claim on a grey shade you mentioned in a message.

There is one more limit worth knowing before you rely on it. Escrow protects the transaction, not the timeline. A refund six weeks after a missed ship date does not put bags in the hands of backers who were promised them in May, and it does not repair the comment thread on your campaign page. Use escrow for financial safety and use contract milestones plus inspection gates for schedule safety. They are different tools and you need both.

How big the deposit should be

Deposits on custom bag orders typically run 30 to 50 percent. Thirty is the most common on a standard construction where materials are stock items or close to stock. Forty to fifty appears when the programme needs custom dyed fabric, a custom printed pattern, or a tooling investment such as a new zip puller mould or a print screen, because those items are bought before anything else and cannot be returned or reused.

Ask what the deposit buys, in writing. A good answer names the materials: fabric in a stated quantity, webbing, zips, labels, and any tooling. A vague answer saying the deposit secures production is a warning, because production capacity is not what the money is buying if no line slot has actually been booked and no material has been ordered. The test is whether the partner can tell you what has been purchased by Friday.

Also ask whether the deposit is refundable and under what condition. On a genuine custom programme it usually is not once materials are cut, and that is fair. What is not fair is a deposit that is non refundable before any material has been bought. A reasonable clause reads: refundable in full if cancelled before material release, and refundable less committed material cost after that date, with the committed cost evidenced by supplier invoices.

Currency, bank charges and the invisible cost

Almost all bag programmes are quoted in USD and almost all creator bank accounts are not. That gap costs money in three separate places: the conversion spread, the sending bank fee, and the receiving bank fee. Budget 1 to 3 percent of the transfer value in total, and more if the payment routes through an intermediary bank, which most international wires do.

• The sender fee, typically 15 to 40 USD per wire
• The intermediary bank deduction, often 15 to 25 USD and invisible until the money arrives short
• The receiving bank fee at the beneficiary bank
• The FX spread, which on a consumer account can run 2 percent or more above the mid market rate

Two practical defences. First, agree whether the balance invoice is net of bank charges, meaning you pay the fee on your side and the partner receives the full invoiced amount. Without that line, a 70 percent balance can arrive short and hold the shipment while a few dozen dollars are chased across time zones. Second, if your programme runs across two or three payments over four months, consider holding USD in a multi currency account, because a two percent currency move on a 30,000 USD programme is 600 USD of margin you did not plan to lose.

It is also worth stating the currency alongside every amount in the contract. An invoice line that reads 8,000 with no currency code is an argument waiting to happen, and it will happen at the worst possible moment, which is the day the balance is due.

Milestone payments tied to production events

Calendar based schedules fail on custom programmes because the events they are meant to track slip. A schedule that says 30 percent on 1 March, 40 percent on 1 April and 30 percent on 1 May gives you no protection at all if sampling takes three rounds instead of one, because the dates keep arriving while the work has not. Event based schedules survive that, because the money follows the work rather than the calendar.

1. 30 percent on countersignature of the order confirmation and approval of the pre-production sample
2. 40 percent on written confirmation that bulk materials are in house and the line slot is booked
3. 30 percent against a passed AQL 2.5 inspection report, before the goods are released for shipment

Note where the largest single payment sits: behind the inspection gate. That is deliberate and you should not trade it away for a small discount. On a 500 pcs per style and colourway minimum, a full run of defective goods is not a partial loss, it is the entire campaign reward tier, and the only way to keep that risk manageable is to keep a meaningful balance unpaid until the goods have been counted and checked against a written standard.

Add a standstill clause while you are at it. If inspection fails and a rework is agreed, the balance due date should pause until the rework passes rather than continuing to run against the original date. Without it you can end up paying for goods that are sitting on a rework table, which is the worst of both outcomes.

Tie the payment calendar to exactly the same milestones you already track in the production partner onboarding process, so that the money calendar and the production calendar are the same document. Two parallel calendars drift apart inside a fortnight, and the drift always surfaces as a surprise invoice.

Clauses that protect a crowdfunding timeline

Five clauses earn their place in a crowdfunding order confirmation. They are short, they are standard in the trade, and asking for them early signals that you have done this before, which changes how the rest of the conversation goes.

• Delivery defined as the date goods are handed to the carrier at FOB Xiamen, not the date production ends and not the date a truck is booked
• A late delivery remedy expressed as a small credit against the balance, typically 0.5 percent per week capped at 5 percent, enough to be meaningful and small enough to be accepted
• An inspection condition stating the balance becomes due only on an AQL 2.5 pass under ISO 2859-1, with a named rework path if it fails
• A specification freeze stating that changes requested after pre-production sample approval move the delivery date by written agreement
• A price validity period, because fabric and hardware prices move and an open ended quote is not really a quote

The second clause is the one creators skip most often and regret most often. A delivery remedy does not need to be punitive to work; it only needs to exist, so that a schedule conversation has something concrete behind it. Ask for it early, while the relationship is friendly, not late, when you are already behind and asking for a favour.

The fifth clause protects you in the other direction. If you take eight weeks to approve a sample, material prices may have moved and the partner is entitled to revisit the number. A price validity clause makes that conversation explicit and time bounded instead of a surprise line on the balance invoice.

Red flags in a payment request

Some payment requests are not negotiation positions, they are signals. Here are the ones worth stopping the process for, none of which requires you to accuse anyone of anything. Each one is simply worth a direct question, and a good partner answers it in a sentence.

• 100 percent upfront on a first order, with no production reason offered for it
• A bank account in a personal name, or in a country unconnected to the production address
• A change of bank details sent only by email, especially close to a due date
• A request to split payment across two invoices to two entities to save on fees, which also breaks your paperwork trail
• A refusal to name an AQL level or to make the balance conditional on inspection
• Pressure tied to a price that expires the same day you asked a question

None of these is automatically bad faith; several are just habit carried over from a different kind of customer. But each deserves a direct question and a documented answer. If the answer takes three days and two follow up emails, treat that delay as information as well, because communication speed during negotiation is an accurate preview of communication speed during bulk production.

The mirror image is also true and worth looking for. A partner who offers a fair 30/70 without being asked, names AQL 2.5 in their own quotation, and puts delivery and inspection conditions in writing is showing you their operating discipline. Those details correlate strongly with how a bulk run will actually go, which is exactly why our vendor comparison guide weights written terms above headline price.

A worked example: 1,500 backpacks FOB Xiamen

Take a realistic campaign reward: 1,500 backpacks across three colourways at 500 each, which matches the MOQ structure of 500 pcs per style and colourway exactly. Unit price at FOB Xiamen lands at 14.80 USD, giving a total order value of 22,200 USD before freight and duty.

The cash out of pocket before you see a finished, inspected bag is the sample cost plus 6,660 USD. That is the number to plan your pledge money around, not the full 22,200 USD. The 15,540 USD balance falls due at roughly the point your campaign has already collected, which is the whole reason the 30/70 structure suits crowdfunding better than any other arrangement.

Now compare with an alternative schedule asking for 50 percent upfront. You would pay 11,100 USD before bulk starts and hold 11,100 until the end. You gain nothing in return, because materials are bought either way, and you surrender 4,440 USD of leverage. On a first order with a new partner that trade is not worth making, no matter how small the discount attached to it looks.

Then add the timeline. Sampling runs 6-10 working days per round, or 12-15 working days on a complex construction with custom hardware or moulded parts. Two rounds plus approval, then 35-50 days of bulk, then freight and customs. If bags need to be in backers hands in October, the deposit has to clear in early July. Working backwards from the promise is the only reliable way to set a payment calendar, and it should be done before you launch rather than after. The lead time guide for creators lays out that backward plan in full.

The unpaid balance is the only quality control a creator actually owns. Spend it last, and spend it against a report, not against a date.

One last practical note on documentation. Keep every payment receipt, every inspection report and every signed revision in a single folder named by programme, and reconcile it against the order confirmation before each transfer. When a dispute arises, the side with the cleanest folder usually wins it, and building that folder costs nothing while you go.

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