Key takeaways
- A bank transfer (TT) is faster and cheaper, but puts all the risk on whoever pays first.
- A letter of credit (LC) ties payment to documents rather than to trust, and suits large or first-time deals.
- The common arrangement on a first order: a deposit on manifest approval, the balance before shipment or against documents.
- The bank account must be in the same company name as the invoice — always, without exception.
- Any last-minute pressure to change bank details is a warning sign, not an administrative detail.
The underlying problem
In international trade the two sides cannot hand over at the same instant. One has to move first. If you pay first you risk no shipment; if the supplier ships first they risk no payment. Every payment instrument we are about to discuss is just a different way of splitting that risk.
Bank transfer (TT)
The simplest, cheapest and fastest. You transfer, the supplier ships. It costs a few hundred dirhams in bank charges and needs no advance arrangement. The drawback is obvious: once the money leaves, your only recourse is the law in the supplier's country — slow, expensive and uncertain.
A TT is appropriate when the value is one you could absorb losing, or when you have dealt with the counterparty before and it worked. It is not appropriate for a first large deal with someone new.
Letter of credit (LC)
Here the bank becomes a party to the deal. You open a credit in the supplier's favour, and the bank commits to pay them if — and only if — they present a specified set of documents by a specified date. The bank does not verify the goods, only the paperwork. That is a point many people get wrong.
The strength of an LC comes from how precisely you write its conditions. If you require a clean bill of lading, a certificate of origin and a third-party inspection report, the supplier is not paid until all three are presented. If you did not require the inspection report, nobody will produce one.
The drawbacks: cost (bank fees far above a transfer), slowness and complexity. A single character mismatched between documents can hold up payment and require an expensive amendment. This is why LCs are not normally used on small deals — the administrative cost eats the benefit.
A quick comparison
| Factor | Bank transfer (TT) | Letter of credit (LC) |
|---|---|---|
| Cost | Low | High |
| Speed | Near immediate | Days to weeks to arrange |
| Buyer protection | None once sent | Strong if the conditions are well written |
| Best for | Smaller orders and established relationships | Large deals and first transactions |
The middle arrangement most traders actually use
In practice, most wholesale deals use neither in pure form. The common arrangement is a deposit when the manifest is approved — covering the supplier's cost of preparing the shipment and proving you are serious — with the balance immediately before shipping or against a copy of the bill of lading and the loading photographs.
That arrangement is reasonable for both sides: the supplier is not preparing a container for a buyer who might vanish, and you are not paying in full before seeing evidence the goods were actually loaded. As dealings repeat, terms tend to move gradually in your favour.
Never compromise on this: the bank account must be in the same company name as the invoice. Not an individual's account, not an account in an unrelated third country, and not a last-minute change of details by email. If any of that happens, stop and call the other side on a number you already have — not a number given in the message.
Warning signs in payment terms
- Full payment up front on a first deal, with any middle arrangement refused.
- A bank account in a person's name, or a different company name than the invoice.
- Manufactured time pressure: "the price holds today only" or "another buyer is ready".
- Refusal to provide a trade licence or verifiable company details.
- Refusal to provide loading photographs or a seal number before taking the balance.
One of these appearing does not automatically mean the other side is a fraud. It does mean you verify further before transferring. A serious supplier will not be offended by your questions — they will expect them.
We agree terms before loading, not after
Ask us for the trade licence, company details and a proforma invoice before you transfer anything. That is what we expect a serious buyer to do.