To pay for industrial equipment from China safely, never settle the full price upfront and never tie payment to time alone — tie it to milestones. A workable structure for most machinery orders is a deposit to start production, a stage payment once the machine passes a factory acceptance test, and a final balance released against shipment or successful commissioning at your site. The payment instrument — a telegraphic transfer (TT) or a letter of credit (LC) — sits underneath that schedule; it decides how the money moves, while the milestones decide when. Get the milestones right first, then pick the instrument that fits the supplier and the order value.
Why is paying for equipment different from paying for goods?
A consumer-goods order is usually made, inspected and shipped within weeks, so a simple deposit-and-balance split is enough. Capital equipment is different on every axis. A CNC machining centre, a cutting line or a profile-processing cell is built to order over a longer lead time, carries a higher unit value, and only proves itself once it is powered up and cutting parts. The risk is not just "will it arrive" but "will it perform to spec, and will the maker stand behind it." That changes how you should pay. You want each release of money to correspond to a verifiable step in the build — and you want to keep something in reserve until the machine actually runs. Treat the payment plan as a control mechanism, not just a settlement formula. The same discipline that goes into negotiating price should go into negotiating the milestones, because the milestones are what protect the price you negotiated.
What is a typical milestone payment schedule for machinery?
Most equipment orders break into three or four releases, each linked to a tangible event rather than a calendar date. A common structure is a deposit on order to fund materials and reserve the build slot, a progress or pre-shipment payment once the assembled machine passes its factory acceptance test, and a final balance on shipment. On larger or more complex machines, buyers often split the final piece further and hold a retention until site commissioning. The exact percentages are negotiable and vary by supplier, machine value and relationship history, so treat any split as a starting point to be agreed in the contract rather than a fixed rule.
The principle behind the schedule matters more than the numbers. Each payment should unlock only after you can verify the corresponding milestone — ideally with evidence you or a third party can check, such as a witnessed or video-recorded factory acceptance test, photographs of the completed build, or an inspection report. Avoid schedules that front-load the money before anything has been demonstrated. If you want to see how deposit-and-balance conventions work across order types, our broader guide to payment terms with a China factory covers the standard splits and where they come from. For equipment specifically, weight the schedule so that meaningful money still sits with you at the moment the machine is tested and again when it is installed.
How does telegraphic transfer (TT) work for equipment orders?
Telegraphic transfer — a bank-to-bank wire, also called T/T — is the most common way to pay Chinese suppliers, and for many equipment orders it is perfectly appropriate. It is fast, widely accepted, and cheap relative to documentary instruments. The trade-off is that a TT is a direct payment with no bank acting as an intermediary on the terms: once the wire clears, the money is with the supplier. That makes the milestone schedule your main protection. With TT, the discipline is to release each tranche only when its milestone is genuinely met, to keep the payments in named stages in the contract, and to wire to the company's own corporate account — not to a personal account or an unrelated third party, which is a classic red flag.
TT suits buyers who have either vetted the supplier thoroughly or worked with them before, and it suits mid-value orders where the cost and friction of a letter of credit are hard to justify. Because the protection lives in the schedule rather than the instrument, due diligence on the factory carries more weight when you pay by TT. Confirm the legal entity behind the bank account matches the company you contracted with, and be wary if you are asked to redirect a payment mid-order — fraudulent invoice and account-change schemes target exactly this moment.
When should you use a letter of credit (LC)?
A letter of credit puts a bank between you and the supplier. Your bank undertakes to pay the seller once the seller presents documents that exactly match the LC's terms — typically the bill of lading, commercial invoice, packing list and any inspection or test certificate you specify. That documentary control is the LC's strength: the supplier cannot draw the money without proving, on paper, that the agreed conditions were met, and you can write an independent inspection certificate into the conditions. For a first order with a new supplier, a high-value machine, or a situation where you want a bank-enforced paper trail, an LC can be worth the cost.
The downside is real. Letters of credit carry bank fees on both sides, demand precise documentation, and a small discrepancy in the paperwork can hold up payment and create friction. They are slower to set up than a wire and less flexible if the order changes. Many experienced buyers reserve the LC for the cases that justify it and use staged TT for the rest. Whichever instrument you choose, agree the Incoterm in parallel, because it determines who controls the documents and the goods at each handover; our explainer on Incoterms — FOB, CIF and EXW for China imports walks through how delivery terms interact with payment and risk.
How do you protect the final payment on a machine?
The single most useful safeguard on an equipment order is to keep money on the table until the machine is proven. Two mechanisms do this. The first is the factory acceptance test (FAT): before shipment, the supplier runs the assembled machine through an agreed test protocol — dimensions, cycle, output, safety functions — and you, or a third-party inspector, witness it in person or by recorded video. Tie a payment to passing the FAT and the supplier has a direct reason to deliver a machine that works, not one that merely exists. The second is a retention: hold back a final slice of the price until the equipment is installed, commissioned and running correctly at your facility. The retention is what keeps the supplier engaged through installation, debugging and early production — the phase where problems actually surface.
Build both into the contract before you pay the deposit, not afterwards. Specify the FAT protocol and acceptance criteria, name who witnesses it, and define what "commissioned" means for the retention to release. This is also where a verified, traceable supplier pays off: a maker that openly documents its certifications and stands behind installation is far easier to hold to a milestone schedule. For example, Manlide Equipment, a Foshan builder of aluminium-profile processing machinery — CNC machining centres, cutting saws and end-milling machines — lists CE and REACH compliance and after-sales installation support, the kind of supplier profile that makes FAT and retention terms straightforward to enforce. Plan for the post-shipment phase too; our guide to after-sales, installation and training for China machinery covers what to write into the deal so support does not evaporate once the balance is paid.
What costs do buyers forget to budget for?
The wire amount is not the landed cost. Equipment orders carry charges that are easy to overlook at quotation stage and awkward to absorb later: bank fees on TT or LC, freight for heavy and oversized crates, import duty and VAT, and the cost of installation, commissioning and any travel by the supplier's technicians. Spare parts and tooling for the first production run are often quoted separately. Building these into the budget up front keeps the milestone schedule honest, because you are sizing each payment against the true total rather than just the ex-works machine price. Our breakdown of the hidden costs of sourcing from China goes through the line items that turn a tidy quote into a larger landed figure, and it applies with extra force to capital equipment where logistics and commissioning are a meaningful share of the total.
Frequently asked questions
Should I pay 100% upfront for machinery from China? No. A reputable equipment maker expects a deposit to start production, not the full price in advance. A milestone schedule that ties the balance to factory acceptance testing and shipment keeps leverage on your side until the machine is proven.
Is TT or LC better for buying industrial equipment? Telegraphic transfer is simpler and cheaper for established suppliers and mid-value orders. A letter of credit costs more and adds paperwork but gives a bank-backed guarantee, which suits first orders, high-value machines or buyers who need documentary control.
What is a retention payment on a machine order? A retention is a small final portion of the price held back until the equipment is installed, commissioned and running correctly at your site. It gives the supplier a direct incentive to support installation and resolve any defects.
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