A buyer is placing a first order of lithium forklift batteries with a factory they have not used before. The supplier proposes a T/T deposit and balance, while the buyer’s finance team wonders whether a letter of credit is safer.
A letter of credit (L/C) protects both sides by making a bank pay against documents that comply with its terms, but it protects documents, not the goods, and it adds bank fees and the risk of discrepancies. T/T is cheaper and simpler but relies on trust. For a first order, many buyers choose a smaller T/T deposit with the balance paid against shipping documents and an agreed pre-shipment check. Payment terms for Redway are agreed per order, so ask for them on the proforma invoice.
How each option works
- T/T (telegraphic transfer). A bank wire from buyer to seller. Common patterns are a deposit with the order and the balance before or against a copy of the bill of lading. Cost is low; the risk sits with whoever pays first.
- Documentary L/C. Under UCP 600 an L/C is a bank’s undertaking to pay if a complying presentation is made. Banks deal with documents, not goods (UCP 600 article 5). Typical documents are the invoice, packing list, bill of lading and certificates named in the credit.
What protects you either way
- Check the supplier’s identity. Company name, bank account name and address must match the contract and the proforma. See our proforma invoice article.
- Pre-shipment inspection. Agree a check by you or a third party before the balance is released, and list the model, quantity, labels and a sample of serial numbers.
- Keep the L/C simple. Request only documents the factory can supply on time, because every discrepancy can delay payment. Ask the factory which certificates it can issue, such as the UN 38.3 summary.
- Incoterm and payment together. Payment timing and risk transfer interact; read our EXW, FOB or CIF article.
A sensible first-order pattern
For a first order, many buyers use a modest deposit, a pre-shipment check and the balance against documents, then move to simpler terms once the supplier has delivered correctly a few times. Ask what terms the factory is willing to offer and compare the total cost, including bank charges and the time your money is committed, before choosing.
Risk limits
L/C rules and bank practice vary by country, and bank fees depend on your bank. Take advice from your bank or trade-finance adviser. Neither T/T nor L/C ensures that the batteries are good; that comes from inspection, testing and written warranty terms. This article is general guidance, not financial advice.
Additional perspectives
Compare total cost, not headline rates: bank fees on both sides, the cost of tying up credit lines and the cost of a delayed shipment. For a small first order, L/C fees can exceed the risk you are trying to avoid.
Redway Tech Editorial Team – Finance perspective
Write the payment trigger as an event that can be proved: for example, balance after the inspection report and a copy of the bill of lading. Avoid wording such as ‘on readiness’, which cannot be proved by a document.
Redway Tech Editorial Team – Procurement perspective
Check that the beneficiary name, goods description and port names in the L/C match the invoice and the bill of lading exactly. Small spelling differences are a frequent cause of discrepancy notices.
Redway Tech Editorial Team – Trade compliance perspective
Specifications are taken from Redway product pages as of October 2026. Where a figure isn’t published, this article says so. Confirm current specifications for your model with Redway before ordering. This article is general guidance, not a site-specific engineering assessment.
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