Deposit vs balance payment with an overseas supplier: what is normal?

A deposit is the part you pay up front to secure an order. The balance is what you pay later, usually before shipping or on delivery. There's no single normal deposit: it varies by supplier, product, order size and how well you know each other. Put the split, the dates and the triggers in writing before you pay anything.

How the two payments work

• Deposit: paid when you place the order. It covers the supplier's start-up costs and shows you're serious.
• Balance: paid at an agreed point, such as when production finishes, before shipment, or after delivery or inspection.

Which point you choose decides who carries the risk. The more you pay early, the more risk you hold. The trade.gov Trade Finance Guide describes cash in advance as the option where the seller has almost no non-payment risk, and the least attractive one for the buyer (trade.gov). Open account (goods ship, you pay later) is the reverse. A deposit plus balance sits between the two.

How much deposit is normal?

It varies from deal to deal. What drives the number:

• New or established supplier. A first order with a new supplier often means stricter terms. A long history can support softer ones.
• Custom or standard goods. Custom production costs the supplier more to start, so they tend to ask for more up front.
• Order size and lead time. Big orders and long runs carry more cost before shipping.
• Your bargaining position. Repeat volume, a signed contract and a clean payment history all help you ask for less.

Ask for the split in the proforma invoice and negotiate it, rather than accepting the first number.

Ways to lower your risk

1. Verify the supplier first. Our guide on checking a new overseas supplier covers this.
2. Pay the account on the invoice. Confirm the account holder matches the company name, and confirm any bank change by phone. See our guide on bank-change fraud.
3. Tie the balance to a milestone. Production complete, inspection passed, or shipping documents received.
4. Get it in writing. Amount, due dates, what the deposit covers, and what happens if the order is cancelled or late.
5. Keep records. Proforma, payment confirmation and shipping documents in one folder.
6. Consider the payment method. A card payment can carry dispute rights that a wire does not. Check your card agreement. Our guide on card vs wire covers the tradeoffs.
7. Consider a bank-backed instrument for big orders. A letter of credit is one of the most secure options trade.gov describes, though it costs more and takes paperwork.

Where Shield fits

Shield gives importers a US business account, a business credit card with no upfront or subscription fees, and supplier payments by wire, including to suppliers in China and Hong Kong. Splitting an order into deposit and balance is easier when both payments come from one place with a record of each. Owners can live outside the US, with a US company.

FAQ

Is a deposit refundable? That depends on what you and the supplier agreed. Get the cancellation terms in writing before you pay.

Should I ever pay 100% up front? Sometimes a supplier requires it, especially for a first or small order. It's the highest-risk option for you, so verify the supplier first and weigh the order size.

Can I pay the deposit by card and the balance by wire? If the supplier accepts both, yes. Agree it in writing and keep both payment records.

Next step

To see how Shield supports trade businesses with accounts, cards and supplier payments, visit Shield bank accounts.