Every export deal balances two worries. You don't want to ship and not get paid; the buyer doesn't want to pay and not get the goods. Payment terms decide who carries that risk. Knowing the options lets you say yes to more buyers without gambling.
The payment terms, safest first
| Term | How it works | Your risk | Catch |
|---|---|---|---|
| Advance payment | The buyer pays before you ship. | Lowest | Buyers dislike it; it can lose you orders. |
| Letter of credit (LC) | The buyer's bank promises to pay once you present documents that match the LC exactly. | Low, if the documents are right | Bank fees; any mismatch in documents can delay or stop payment. |
| Documents against payment (D/P) | Your bank releases the shipping documents to the buyer only when they pay. | Medium | No bank guarantee: the buyer can refuse, leaving your goods at a foreign port. |
| Documents against acceptance (D/A) | The buyer gets the documents by accepting a bill to pay later, for example in 60 days. | Higher | You've given up the goods and are relying on the buyer to pay on the due date. |
| Open account | You ship and invoice; the buyer pays on agreed credit terms. | Highest | Only for trusted, long-standing buyers, ideally with credit insurance. |
Letters of credit
Letters of credit follow the International Chamber of Commerce's UCP 600 rules. The bank pays against documents, not goods, so the documents must match the LC exactly. Before accepting, have your bank review the LC for terms you can't meet: a shipment date that's too tight, documents you can't produce, or inspection requirements. A confirmedLC, where an Indian or international bank adds its own promise, protects you if the buyer's bank can't pay.
D/P and D/A collections
Documentary collections follow the ICC's URC 522 rules. Banks pass documents and money between you and the buyer, but unlike an LC they don't guarantee payment. With D/P the buyer can't take the goods without paying; with D/A they can, against a promise to pay later. Both are cheaper than an LC and common with repeat buyers.
Credit insurance (ECGC)
ECGC, the government-owned export credit agency, insures exporters against a buyer not paying (commercial risk) and against events like war or payment restrictions in the buyer's country (political risk). Its standard short-term policy covers credit terms of up to 180 days. You get a credit limit approved for each buyer; ECGC's check on the buyer is itself useful information. Cover lets you offer D/P, D/A or open account terms with much less risk.
Terms for a first order
- Ask for advance or part-advance, for example 30% with the order and the rest before shipment or against documents.
- Or a confirmed letter of credit for larger orders.
- Check the buyer before offering credit: registration, trade history, references, and an ECGC credit limit if you'll insure.
- Unsure what to offer? Try the payment terms picker.
- Walk away from red flags: fees requested before an order, pressure to ship large first orders on open credit, or bank details that change. Our buyer guide lists the signs.
Bringing the money home
Export proceeds must come into India through proper banking channels within the time RBI allows, generally 15 months from export under the current rules. From 1 October 2026, RBI's new regulations set 15 months from shipment for goods, or 18 months when they are invoiced or settled in rupees. Keep the bank's inward remittance records for each shipment; you need them for GST refunds and export records.
Questions
What payment terms should I ask for from a new buyer?
Advance, or a part-advance with the balance before shipment or against documents, or a confirmed letter of credit. Move to D/P, D/A or open account only as trust and order history build, ideally with ECGC cover.
Does a letter of credit guarantee I'll be paid?
Only if you present documents that comply exactly with its terms. Small discrepancies, such as a misspelt name or a late shipment date, can hold up payment. Have your bank check the LC terms before you accept the order.
How long do I have to bring export payments into India?
Generally fifteen months from export under the current rules. From 1 October 2026, RBI's new regulations set fifteen months from shipment for goods, or eighteen months when the goods are invoiced or settled in rupees.