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Import deposits, letters of credit, and the 179 days your cash is gone
The invoice says 168,000. The cash cycle says you need it from the day you place the order until roughly six months later.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
Importing changes the shape of a purchase more than it changes the price. A domestic supplier on 30-day terms is financing you. An overseas supplier taking 30 per cent at order and the balance against shipping documents is being financed by you, from the day you commit until the day your customer pays.
Count the days first, then decide what to borrow.
The cash cycle, counted properly
- Deposit at order: 50,400
- Balance against documents: 117,600
- Production: 45 days
- Ocean transit: 32 days
- Customs clearance and drayage: 7 days
That is 84 days from the deposit leaving your account to goods on your shelf. Then add the time to sell — say 75 days of average stock cover — and the time for your customer to pay, say 20 days. 179 days from deposit to cash back.
Financing 198,410 of landed cost across 179 days, at an illustrative 13 per cent, costs 12,649. That is 7.5 per cent of the order value, and most importers have never calculated it, because the interest arrives as monthly line items rather than as a number attached to the shipment.
Landed cost is not the invoice
The purchase order says 168,000. What leaves your bank account:
- Goods: 168,000
- Duty at an illustrative 12 per cent: 20,160
- Ocean freight and insurance: 9,400
- Customs broker: 850
Landed cost 198,410, an uplift of 18.1 per cent over the invoice. Price your margin off the landed number. Importers who price off the invoice and discover duty and freight afterwards have systematically overstated their gross margin, and that overstatement is now embedded in every borrowing decision that used it.
Duty rates are specific to the commodity code and the country of origin, and both change. Confirm the classification with your broker in writing before the order, not after the goods are on the water.
What a letter of credit actually does to your cash
A letter of credit is a bank's undertaking to pay your supplier when they present documents that comply exactly with the terms. It solves a trust problem. It does not, by itself, solve a cash problem — and it can make the cash problem worse.
Costs to ask about, in writing, before you apply: the issuance commission, the amendment fee, the discrepancy fee, the confirmation charge if the seller wants a second bank's guarantee, and the courier charges. An issuance commission at an illustrative 0.75 per cent on 168,000 is 1,260 — the discrepancy fees are what surprise people, because minor documentary errors are common and each one costs money and days.
The most useful thing to know about letters of credit: banks pay against documents, not against goods. If the documents comply and the shipment is wrong, the bank still pays. An LC protects you against a supplier who does not ship. It does not protect you against a supplier who ships the wrong thing.
Terms that change the arithmetic
Matching a product to the cycle
The 179-day cycle has three distinct segments and they do not want the same financing.
- Deposit to shipment is pure supplier risk with nothing to secure. A line of credit or your own cash. Lenders dislike this segment; there is no collateral yet.
- Shipment to sale is secured by goods. Inventory-backed facilities and, where the buyer is committed, purchase order financing can reach here — though PO finance generally wants finished goods against a non-cancellable order from a creditworthy customer, not speculative stock.
- Sale to collection is a receivable, which is the easiest segment to finance. See how invoice factoring works.
Financing the whole 179 days with one expensive short-term product is the common mistake. Financing the last segment cheaply because it is easy, while funding the first two out of the operating account, is the common near-miss — it works until one shipment is delayed.
Before you send the deposit
- Build the day count for this specific order: production, transit, clearance, expected stock cover, expected collection.
- Compute landed cost with duty, freight, broker and any port charges, and recompute your gross margin on that number.
- Multiply the landed cost by your cost of money for the number of days, and add it to the cost of the goods. That is what the order actually costs.
- Ask the supplier, in one message, for a lower deposit, a term draft, and a split shipment. You will usually get one of the three.
- If a letter of credit is required, get the full fee schedule in writing and confirm whether it will be cash-secured or facility-backed, because those are different transactions.
- Confirm the commodity code and duty rate with your broker before the goods ship.
- Set the markdown date now for stock unsold by a specified day, and model the cash that produces. The 179 days assumed the goods sell in 75.
Where this applies
Related questions
What does this guide cover?
The invoice says 168,000. The cash cycle says you need it from the day you place the order until roughly six months later.
Which funding products does this apply to?
Working Capital, Term Loan, Business Line of Credit, Invoice Financing. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.
Is this specific to retail?
It is written around how a retail business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.
Who writes this?
The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.
How do I know a figure here is right?
Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.
Are the examples real deals?
No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.
Why do you never say what a typical rate is?
Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.
Is this financial or legal advice?
No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.
Can I reuse this content?
Quote a paragraph with a link back. Do not republish whole articles.