# China Supplier Payment Terms Calculator: T/T Deposit vs L/C

> Source: https://netray.co/tools/china-supplier-payment-terms-tt-vs-lc-cost-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Compare the financing cost of a 30/70 telegraphic transfer against a usance letter of credit and find the break-even bank fee.

## Category

cost-finance

## Region

China

## Industry

Manufacturing

## Audience

- Buyer
- Finance controller
- Treasury
- Sourcing manager

## Tool

**Kind:** calculator

**Currency:** $

**Inputs:**

#### Order value

**Key:** order_value

**Type:** number

**Default:** 100000

**Min:** 0

**Step:** 1000

**Unit:** USD

#### T/T deposit with order

**Key:** deposit_pct

**Type:** slider

**Default:** 30

**Min:** 0

**Max:** 100

**Step:** 5

**Unit:** %

**Help:** The balance is paid before shipment.

#### Production lead time

**Key:** prod_days

**Type:** number

**Default:** 45

**Min:** 0

**Step:** 1

**Unit:** days

#### Shipping time to your dock

**Key:** transit_days

**Type:** number

**Default:** 35

**Min:** 0

**Step:** 1

**Unit:** days

**Help:** From shipment date (bill of lading) to receipt.

#### L/C usance after bill of lading

**Key:** usance

**Type:** slider

**Default:** 60

**Min:** 0

**Max:** 180

**Step:** 5

**Unit:** days

#### Annual cost of capital

**Key:** wacc

**Type:** number

**Default:** 9

**Min:** 0

**Max:** 40

**Step:** 0.5

**Unit:** %

#### Total L/C bank fees

**Key:** lc_fee_pct

**Type:** number

**Default:** 1.2

**Min:** 0

**Max:** 10

**Step:** 0.1

**Unit:** %

**Help:** Opening, amendment, negotiation and confirmation charges for the whole tenor.

#### Supplier price premium for deferred payment

**Key:** premium_pct

**Type:** number

**Default:** 0

**Min:** 0

**Max:** 10

**Step:** 0.1

**Unit:** %

**Outputs:**

#### Deposit amount

**Key:** deposit

**Expr:** order_value * deposit_pct / 100

**Format:** currency

#### Balance before shipment

**Key:** balance

**Expr:** order_value - deposit

**Format:** currency

#### T/T financing cost

**Key:** fin_tt

**Expr:** deposit * wacc / 100 * (prod_days + transit_days) / 365 + balance * wacc / 100 * transit_days / 365

**Format:** currency

**Description:** Capital tied up before the goods arrive.

#### L/C financing cost (negative = benefit)

**Key:** fin_lc

**Expr:** order_value * wacc / 100 * (transit_days - usance) / 365

**Format:** currency

#### L/C total cost

**Key:** cost_lc

**Expr:** order_value * lc_fee_pct / 100 + order_value * premium_pct / 100 + fin_lc

**Format:** currency

**Primary:** true

#### T/T cost minus L/C cost

**Key:** saving

**Expr:** fin_tt - cost_lc

**Format:** currency

**Primary:** true

**Description:** Positive means the L/C is cheaper.

#### Break-even total L/C fee

**Key:** breakeven_fee

**Expr:** (fin_tt - fin_lc - order_value * premium_pct / 100) / order_value * 100

**Format:** percent

**Chart:**

#### Cost of T/T vs L/C by usance days

**Type:** line

**X:** usance

**From:** 0

**To:** 120

**Steps:** 25

**Series:**

- fin_tt
- cost_lc

**Disclaimer:** Financing-cost comparison only. It does not price supplier credit risk, prepayment loss risk, FX or the quality protection that documentary terms may give.

## Content

**Intro:** Most China suppliers ask for a 30 percent deposit and 70 percent before shipment. A usance letter of credit moves payment later, at the price of bank fees. This calculator compares the two on cost of capital so you can negotiate with numbers.

**Sections:**

#### How to use it

**Body:** Enter the order value, the T/T deposit percentage, production and shipping days, and your annual cost of capital. For the L/C side, enter the usance period that starts at the bill of lading date, the total bank fees as a percentage of the order, and any price premium the supplier adds for deferred payment. The tool returns the financing cost of each route, the saving, and the break-even bank fee at which both options cost the same. The chart shows how a longer usance changes the L/C total.

#### The method

**Body:** Cash tied up before receipt is multiplied by the annual rate and the fraction of the year it is outstanding. Under T/T the deposit is out for production plus transit days and the balance for transit days. Under the L/C payment is due usance days after shipment, so the buyer is funded by the supplier's bank for the days beyond arrival, which gives a negative financing cost when usance exceeds transit. Fees and any supplier premium are added to the L/C side.

**Bullets:**

- T/T cost = deposit x rate x (production + transit) / 365 plus balance x rate x transit / 365
- L/C financing = value x rate x (transit - usance) / 365
- Break-even fee solves for equal total cost

#### Reading the result and mistakes

**Body:** On a 100,000 dollar order with default inputs, T/T ties up capital worth roughly 1,600 dollars, while a 60 day usance L/C earns a small benefit before 1,200 dollars of bank fees. The L/C wins only if fees stay below the break-even. Mistakes include ignoring supplier discounts for prepayment, forgetting the L/C may need cash margin with your bank, and treating cost as the only factor. Documentary terms also reduce the risk of paying for goods that never ship.

**Cta:** If you track open POs and payment milestones in an ERP, Netray can build a read-only view of working capital tied up per supplier. It can run on your own infrastructure.

**Faq:**

#### What is a usance L/C?

**Answer:** A letter of credit where the issuing bank pays the supplier at sight or at maturity, with the buyer's payment due a set number of days after the shipping document date. The tenor is the usance period.

#### Is the L/C always cheaper?

**Answer:** No. Bank fees, cash margin requirements and supplier premiums can exceed the capital cost saved. The break-even fee output shows the maximum total fee at which the L/C still wins.

#### What cost of capital should I use?

**Answer:** Use the rate you would pay on a short-term credit line or your internal hurdle rate. Using a very low rate makes T/T look cheaper than it is for cash-constrained buyers.

#### Does this price supplier risk?

**Answer:** No. A 30 percent deposit paid months ahead carries credit risk. Documentary terms transfer part of that risk to banks, which is a benefit not captured in this financing-only comparison.

## Search terms

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