by Mike Bellamy
Photo by Kelly Sikkema on Unsplash
I'm doing phone accessories business in Sri Lanka – can I get items for credit in China?
Mike writes:
“Net Terms” is another way of saying “buying on credit with the supplier”. In most cases, especially if it is an initial PO, China suppliers will rarely offer “net terms”. Keep in mind that for the Chinese factory, net 30 terms really mean 120 days of project finance- 30 days to buy the material, 30 days to process, 30 days to ship across the pacific and 30 more days to wait for payment. It certainly is possible to achieve net terms in China, but it will probably be easier for you to move to better terms with your supplier after both sides have established a working relationship and trust. Be prepared not to have terms during the initial phases of the relationship.
And if a Chinese supplier offers “net terms” on an initial order, it could be a scam to get you to transfer funds for tooling (that doesn’t exist) or trick you into paying for some other related fees like shipping and customs clearance (on an order that may not exist). It really happens, just check out this Indian buyer that got a load of bricks shipped to him from China: https://www.supplierblacklist.com/2015/08/28/tianjin-oufute-technology-co-ltd-2/ !
Be very careful! Use verified suppliers and due your due diligence. GlobalSources.com is a relatively safe place to source, compared to other platforms, but if you are a small buyer with no ability to pay reasonable terms, you may not find any (legit) suppliers in China willing to work with you.
Don’t be surprised if a supplier asks for 100% payment in advance. Realize this is negotiable, just as you wouldn’t necessarily accept the first offer of price without negotiation. I have found that “30-40-30 terms” are often an acceptable middle ground on payment terms, fair to both parties.
For more information, here are a few blog posts I have written on the subject of supplier payments:
https://www.chinasourcinginfo.org/2012/11/20/paypal-how-to-protect-myself-as-a-buyer/
