MOQ, deposits and payment terms, explained

Sourcing conversations move fast into jargon: MOQ, deposit, balance, TT. Each term is really a decision about cash and risk. Here is what they mean for a buyer, and what to pin down before you agree.

MOQ — the supplier's floor

Minimum order quantity is the smallest run a supplier will take. It exists because setup, tooling and material buying have fixed costs, so smaller orders cost more per unit or carry a tooling charge. MOQ is often negotiable, but only if you understand why it is set where it is. Ask what a smaller trial run would cost and what the MOQ buys you — a lower unit price is worth little if it ties up cash you need elsewhere.

Deposit — money at risk before you have goods

A deposit is paid up front, before production, and it is the part of the deal most exposed to risk. Norms vary by category and by how established the supplier is. What matters is not just the size but what it covers and what it commits both sides to. Settle in writing: what the deposit pays for, and what you are owed if the order falls through.

Balance — your remaining leverage

The balance is the rest, paid later. When it is due is the single most important term you negotiate, because it is your leverage over quality. Tie the balance to a pre-shipment inspection so you release it only after the goods are confirmed against your spec — not on a promise or a photo.

Payment methods and the risk they carry

Different methods shift risk differently. A bank transfer (often called TT) is common but offers little recourse once sent. Other instruments trade convenience for protection. You do not need to become a trade-finance expert, but you should know that the cheapest, fastest method usually gives you the least protection — and weigh that against how well you know the supplier.

What to put in writing

Before any money moves, your agreement should name:

• the MOQ and the unit price at that quantity;
• the deposit amount, what it covers, and refund terms if the order fails;
• what triggers the balance, tied to an inspection you control;
• the payment method and the exact account (matched to the company name);
• what happens if the goods do not meet spec.

Numbers here vary by product, supplier and market — MOQ norms differ between categories as far apart as knitwear (HS 6109) and furniture (HS 9403) — so treat any figure as something to confirm, not assume. Once you have a duty rate, our landed-cost calculator turns your unit price and freight into the all-in number so you can see whether the terms still leave a margin. The full sequence is in the buyer's checklist.