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Tooling payment terms stuck at 30/70 L/C—how do you push key accounts to 30/40/30 T/T?
Been quoting a German Tier 1 auto parts account for 6 months on a 12-cavity hot runner family mold, roughly USD 180k. We're at final commercial stage and they insist on 30% deposit / 70% against copy of B/L via L/C at sight. My boss wants 30/40/30 T/T tied to T1 sample approval because our tooling cash flow gets killed—steel and hot runner orders alone eat 50% upfront. Tried offering 2% early-payment discount and splitting the 70% into two milestones, buyer's procurement pushed back saying their global frame agreement mandates L/C. Anyone closed a key account off L/C without bleeding margin? What wording or compromise actually moved them—escrow, bank guarantee, partial retention? Need something I can take into the next call this week.
1 Answers
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30/70 L/C is a cash-flow and risk problem, not a pricing one—they're offloading T1 approval risk onto you. Don't fight the ratio, restructure the milestones.
Three moves: First, split the 70 into 40 on T1 sample approval and 30 on B/L, keep the L/C only for that final 30 so they keep their bank comfort. Second, offer a 2% early-payment discount if they take 30/40/30 T/T—German Tier 1s respond to numbers, not arguments. Third, put steel certification and hot runner lead time in the milestone doc so T1 approval reads as their gate, not yours. If they still balk, ask for a parent-company guarantee instead of the L/C.
#1 Susan Wang
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