2026 Cashmere Payment Terms: How T/T, LC, and Open Account Actually Affect Your Order at an Ordos Factory

When a B2B buyer asks a cashmere factory for a quotation, the conversation usually focuses on micron, ply, gauge, color, and quantity. Payment terms are often the last item discussed, and sometimes they are not discussed at all — the buyer just sends a PO with the factory’s “standard” terms attached and moves on.

This note is for buyers who want to understand what their payment terms actually do at the factory side. Not the financial mechanics of letters of credit — those are well-documented elsewhere — but the operational mechanics: which fiber lot is set aside, which knitting slot is allocated, how the production timeline moves, and where the visible (and invisible) risks sit when the payment term is shorter or longer than the production cycle.

We have observed all four major payment terms at our Ordos facility across many programs and many years. The structural pattern below holds regardless of the specific factory you work with, because it is driven by the cash flow cycle of a Chinese cashmere garment manufacturer, not by individual negotiation preferences.

The four payment terms we see most often in cashmere B2B

For international cashmere buyers sourcing from China, the four most common payment terms are:

1. T/T in advance (30/70 or 50/50) — Telegraphic Transfer, with a deposit paid before production starts and the balance paid against a pre-shipment document pack.
2. LC at sight — Letter of Credit, payable immediately on presentation of conforming shipping documents.
3. LC 30/60/90 days — Letter of Credit, payable 30, 60, or 90 days after presentation of conforming shipping documents.
4. Open account (O/A) 30/60/90 days — Goods ship and the buyer pays 30, 60, or 90 days after the invoice date, on the buyer’s promise alone.

There is a fifth option — consignment — which we occasionally see and would never recommend for a buyer new to a supplier. The financial exposure on consignment is structurally the same as a 90-day open account with no order commitment, and the operational impact on the factory is the most severe of any term we have seen.

What each payment term actually does at the factory

The payment term is not just “when the money moves.” It is a signal to the factory about how much financial risk to absorb on your behalf, and the factory responds with three operational decisions:

• How much fiber to pool and reserve for your program — fiber is the binding working-capital constraint in any cashmere program. Reserving fiber for a buyer whose payment is uncertain means tying up capital that could be used for the next confirmed order.
• Which production slot to allocate — knitting capacity in the Ordos cluster is finite, and slots are allocated first to programs with confirmed working capital.
• How much QC attention to assign — a program with confirmed payment gets the full inspection-slot allocation; a program with delayed or uncertain payment may see its inspection slot deferred.

These three decisions are not visible in the quotation, but they determine whether your order hits the lead time you were quoted.

T/T in advance (30/70 or 50/50)

A T/T deposit — typically 30% on PO confirmation and 70% against pre-shipment documents — is the most factory-friendly payment term. The factory receives working capital before it spends money on fiber, dyeing, knitting, and finishing. Operationally, this means:

• Fiber is reserved on receipt of the deposit. The mill stops offering that lot to other buyers.
• The knitting slot is allocated in the next weekly scheduling round. No slot competition.
• The QC slot is in the standard pre-shipment window. No deferral.
• Lead time matches the quotation. The buyer sees the production calendar we described in the lead time guide.

For a buyer, T/T 30/70 is the lowest-risk delivery option, and the deposit is typically the buyer’s only cash-flow exposure during production. The financial risk sits with the factory — and the factory accepts that risk because the deposit covers its working-capital needs.

LC at sight

An LC at sight gives the buyer a documentary guarantee of payment on shipment, and gives the factory a bank-guaranteed payment immediately on document presentation. Operationally:

• Fiber is reserved on LC opening or first advising-bank confirmation, not on PO confirmation. A buyer who opens the LC quickly gets the same fiber reservation as a T/T deposit; a buyer who delays LC opening may see the lot offered to other buyers in the interim.
• The knitting slot is allocated when the LC is confirmed. Same allocation logic as T/T, with a slight delay (typically 5–10 banking days) for the LC opening and advising process.
• The QC slot is in the standard pre-shipment window. No deferral, assuming the LC documents match the shipment cleanly.
• Lead time matches the quotation, plus the LC opening cycle if it has not been opened by the time of PO.

The trade-off for the buyer: an LC at sight costs more than T/T (bank fees of typically 0.125%–0.25% of the LC value per quarter, plus an advising-bank fee) but provides documentary protection against shipment disputes. For a buyer new to a Chinese cashmere factory, an LC at sight is often a reasonable middle ground — the factory gets working-capital certainty, the buyer gets documentary protection.

LC 30/60/90 days

An LC with a deferred payment schedule — typically 30, 60, or 90 days after document presentation — keeps the documentary protection of an LC but defers the buyer’s actual cash outflow. Operationally, this is where the structure of the payment term starts to interact visibly with the production cycle:

• Fiber is still reserved on LC opening, but the factory’s working-capital position is materially different. The factory has shipped goods and is waiting 30/60/90 days for payment, which means the factory’s capital is tied up in work-in-progress plus shipped goods plus receivables for that the period.
• The knitting slot is allocated when the LC is confirmed, same as LC at sight. But a factory with limited working capital may prioritize confirmed T/T deposits over confirmed-but-deferred LCs in slot allocation, because the deferred LC still ties up capital.
• The QC slot is in the standard pre-shipment window, but the factory’s incentive to manage QC disputes with extra care is reduced — once the goods ship, the dispute resolution falls on the documentary chain, not on the factory’s own risk absorption.

For a buyer, an LC 30/60/90 days is a slightly higher-friction delivery option than LC at sight. The buyer gets cash-flow flexibility; the factory accepts a longer working-capital cycle; the operational risk of slot allocation is small but real.

Open account 30/60/90 days

Open account is the most buyer-friendly and most factory-stressed payment term. Goods ship on the buyer’s promise to pay in 30/60/90 days. There is no documentary protection; the factory’s only recourse if the buyer does not pay is commercial collection or litigation. Practically, what we see:

• Fiber reservation is conditional, not confirmed. A factory with limited working capital will typically pool fiber for an O/A program only after the buyer’s credit has been verified by a third party (e.g., Dun & Bradstreet, a Chinese credit-insurance provider, or a prior trade history).
• The knitting slot is allocated after fiber reservation, with a buffer. A factory that has been burned by an O/A default in the past will hold a 1–2 week buffer in the slot allocation, to allow reallocation if the buyer’s credit check fails or the buyer’s PO is amended.
• The QC slot is in the standard window, but the factory’s exposure to post-shipment disputes is highest — once the goods are in the buyer’s hands and the payment is not yet due, the factory has very limited recourse.
• Lead time is typically 1–3 weeks longer than the quoted lead time for a T/T or LC program of equivalent size. The buffer does not appear in the quotation, but it appears in the actual delivery date.

For a buyer, O/A 30/60/90 is the highest-friction delivery option for any program that has not been done with the factory before. The cash-flow benefit is real, but the operational cost shows up in the delivery date and in the factory’s day-to-day attention to your program.

The hidden factor: working-capital stress at the factory

The structural reason for the slot, fiber, and QC behavior above is the working-capital cycle of a cashmere garment factory in Inner Mongolia. A typical cashmere garment program ties up factory capital across these stages:

Stage	Capital tied up	Typical duration
Fiber reservation (auction-round lots)	100% of fiber cost	30–60 days before knitting
Yarn spinning	Fiber cost + spinning fee	14–21 days
Yarn dyeing	Yarn cost + dyeing fee	14–28 days
Knitting	All previous + labor	21–45 days
Finishing + QC	All previous + finishing labor	7–14 days
Goods in transit to buyer	All previous + shipping	28–45 days

The factory’s capital is tied up for the entire production cycle plus the transit cycle — typically 90–150 days from fiber reservation to buyer payment under T/T, and 120–210 days under O/A 90 days. A factory running 20 active programs at any time has working capital tied up across all of them.

This is why a T/T deposit — even at 30% — is operationally meaningful: it covers a meaningful share of the fiber and yarn costs, and lets the factory commit its own working capital to the rest of the program with less risk. And it is why an O/A 90-day program for a new buyer gets the buffer treatment: the factory cannot tell, before shipment, whether the buyer’s payment will actually arrive on day 90.

What the buyer actually sees

The operational behaviors above show up in the buyer’s experience in three concrete ways:

1. Lead-time variance. T/T and LC-at-sight programs hit the quoted lead time within a small variance (typically ±5%). LC deferred and O/A programs show a wider variance — typically 1–3 weeks longer than the quoted lead time, with occasional earlier delays if the factory is short on working capital and prioritizes confirmed-payment programs.

2. Color and specification flexibility. A buyer who wants to amend a color or specification mid-program is more likely to be accommodated on a T/T or LC-at-sight program, because the factory has already absorbed its working-capital risk and the marginal cost of an amendment is small. A buyer on an O/A program is more likely to be asked to re-confirm the PO with the amendment, because the factory is still exposed.

3. QC dispute handling. A QC dispute (e.g., a minor color variation, a small mending issue) is typically resolved in the buyer’s favor with a small allowance or rework on a T/T program, because the factory wants to maintain the buyer’s repeat business and the deposit is already in hand. On an O/A program, the factory has less incentive to absorb the cost of a dispute that has emerged after shipment, and the resolution is more likely to be a formal claim against the documentary chain.

These are not moral claims about any payment term being “better” or “worse” — they are structural outcomes of where the financial risk sits.

How to think about the right payment term for a program

The right payment term depends on three things:

• The size and frequency of your orders. A buyer placing a one-off small trial order is more likely to get a T/T or LC-at-sight quote as the factory’s standard, and the operational impact is small. A buyer placing a large recurring program is more likely to negotiate an LC-deferred or O/A term, and the operational impact is significant.
• The trade history between you and the factory. A buyer with a multi-year history of confirmed payments on prior programs will get more accommodating treatment on a deferred term than a buyer with no history, regardless of the buyer’s underlying creditworthiness.
• The cash-flow importance to your business. A buyer for whom the 30/60/90 day cash flow materially affects their working capital should have an honest conversation with the factory about that, rather than asking for O/A on a new program and expecting the factory’s standard slot allocation.

A practical framing: if the lead time and quality of your program matter to your business, the cheapest payment term is rarely the most expensive one in total cost. A T/T 30/70 with a 5% lead-time advantage over O/A 90 days delivers goods faster, with higher QC attention, and with the factory’s full operational commitment. The buyer loses the 30/60/90 day cash flow benefit but gains in delivery certainty and program attention.

A note on consignment

Consignment — where the factory ships goods to the buyer’s warehouse and is paid only when the buyer sells them — is a cashmere trade term we have seen fail more often than any other. The factory’s working capital is fully exposed (no deposit, no documentary protection, no buyer commitment beyond “I’ll pay you when I sell”), and the structural incentives are misaligned: the factory carries the cost; the buyer carries the risk of non-sale.

We do not recommend consignment for a B2B buyer sourcing cashmere from China for resale, except in narrow circumstances where (a) the buyer has a multi-year trade history with the factory, (b) the consigned quantity is small relative to the buyer’s overall cashmere program, and (c) the consignment period is short (typically 30–60 days).

What this guide deliberately does not include

For honesty and to manage expectations:

• No specific 2026 bank fee or LC cost data. Bank fees, advising-bank fees, and LC discount rates vary by bank, by country, and by program size. Use your bank’s published tariff and your trade-finance advisor for current numbers.
• No ranking of “best” payment term. The right term depends on program size, trade history, and cash-flow importance — see the framing above. We describe the structural trade-offs; you decide what fits your program.
• No specific factories, banks, or trade-finance providers named. Payment-term behavior is structural across the Ordos cluster and across Chinese manufacturing more generally, not factory-specific.
• No currency hedging or FX risk analysis. FX volatility between USD, EUR, RMB, and JPY is a separate concern from payment terms; we touch on it in the 2026 cashmere market report but it deserves its own analysis.

Where to go next

• For the production calendar and lead time: 2026 Inner Mongolia cashmere factory lead time B2B guide
• For the pasture-side calendar (April–August): 2026 Inner Mongolia cashmere harvest season field guide
• For cost-per-piece breakdown: Wholesale cashmere sweater pricing 2026
• For price ranges and supply outlook: 2026 cashmere market report
• For shipping, customs, and import: Cashmere shipping and import guide
• For contract and payment-term templates: Cashmere B2B contract template and payment terms
• For end-to-end fiber-to-garment process: From pasture to garment: 23 steps at our Ordos facility

If your 2026 or 2027 program involves a payment-term decision, request a quotation and we will lay out the operational implications of each term for your specific program size, lead time, and trade history. The right term is the one that matches your cash-flow needs without adding unnecessary friction to the production cycle.

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DONGXIAO® Editorial is the publishing name for sourcing notes produced by the factory and procurement team at our Ordos, Inner Mongolia facility. The observations in this note are drawn from many years of cashmere garment programs under T/T, LC at sight, LC deferred, and open account payment terms. The structural patterns described are not unique to our facility; they reflect the working-capital cycle of any cashmere garment manufacturer in China. For program-specific payment-term guidance, request a quotation tied to your program size, lead time, and trade history.