Why Clothing Manufacturers Avoid PayPal for B2B Large Orders

If you ask a factory to take a $50,000 deposit via PayPal, many will say “sorry, we can’t.” That can feel annoying especially if you like PayPal because it feels safer. But here’s the uncomfortable truth: PayPal is built for retail-style disputes, fast shipping, and small tickets. Apparel production is the opposite: long timelines, custom specs, freight forwarding, partial deliveries, and quality standards that aren’t “yes/no.” So when a factory refuses PayPal, it’s usually not arrogance. It’s risk math. Below is the real breakdown: fees, disputes, cash-flow holds, and accounting friction, plus what to use instead.

The short answer

Clothing manufacturers avoid PayPal for large orders because:

1. Fees can wipe out profit on thin margins especially cross-border. For Vietnam accounts, PayPal lists 4.40% + fixed fee for receiving international commercial transactions.
2. Disputes are buyer-leaning and can be opened long after payment. “Item Not Received” can be opened within 180 days. “Significantly Not as Described” is often within 30 days of delivery (or 180 days of payment, whichever is sooner).
3. Funds can be held (often up to 21 days, sometimes longer under certain conditions), which blocks the factory from buying fabric and paying workers.
4. Seller protection evidence doesn’t match freight reality. PayPal’s proof of delivery requirements focus on online tracking and delivery to the address shown in the transaction details often not how container shipping works.

PayPal fees hit factories where it hurts: margin

Garment factories don’t price like retail stores. They usually run on tight margins after labor, material waste, rejects, and rework. A percentage-based payment fee sounds small, but on a five- or six-figure order it becomes a real chunk of profit. That forces the factory to either raise the quote or quietly lose money. And if currency conversion is involved, the all-in cost can climb even more.

What the fee looks like in real life

Fees vary by country and product, but PayPal’s own fee pages show that for Vietnam business accounts receiving international commercial transactions, it can be 4.40% + a fixed fee. On a $100,000 order:

• 4.40% = $4,400
• plus fixed fees (small compared to the %)

That $4,400 isn’t “a small processing cost.” For many factories, it can be most of the profit.

Currency conversion makes it worse

PayPal’s user agreement states that when currency is converted, PayPal uses its transaction exchange rate, which includes a currency conversion spread/fee. So even if the headline rate looks okay, the all-in cost can grow once FX is involved.

“Why not just add the fee to the price?”

Factories can but that’s where it gets messy:

• It makes their quote look higher than competitors who price for bank transfer.
• It triggers endless negotiation (“Why are you charging extra?”).
• It complicates invoices and pricing terms.

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So many factories set a clean rule: large orders = bank instruments only.

PayPal disputes don’t fit custom manufacturing

On large international payments, the “real” PayPal cost isn’t just the headline processing fee. You can also get hit by cross-border pricing and currency conversion spreads. When you stack these together, a big payment can lose thousands of dollars before the factory buys a single meter of fabric. That isn’t a rounding error It can equal a worker’s wages or cover rework costs. This is why factories compare PayPal to bank transfer and see PayPal as financially inefficient for bulk production.

The time window is long (and sometimes mismatched)

PayPal dispute timeframes include:

• Item Not Received: must be opened within 180 days of payment.
• Significantly Not as Described: must be opened within 30 days of delivery/fulfillment or 180 days of payment (whichever is sooner).

For manufacturing, that’s scary because:

• Production + ocean freight can already take 45–90+ days.
• Quality claims can be subjective and technical.

The “proof” PayPal wants can be impossible in freight

PayPal’s seller protection rules emphasize:

• Online, verifiable tracking
• Delivered status
• Delivery to an address that matches the transaction details

But many large shipments go to:

• a port
• a forwarder
• a consolidation warehouse
• or under a Bill of Lading workflow

That’s not the same as “delivered to the PayPal address with a courier tracking page.” So factories feel like they’re entering a fight where the rules don’t match their world.

Disputes can also freeze funds fast

PayPal notes that when a buyer files a claim or chargeback, PayPal may place a temporary hold and ask for shipment proof within a short timeframe. For a factory, even a temporary freeze can blow up payroll and materials purchasing.

Holds and reserves can choke production cash flow

Manufacturing is cash-flow hungry. Deposits aren’t “extra money.” They are fuel. PayPal explicitly says new sellers (or certain situations) may have payments held, often up to 21 days, shown as a pending balance. PayPal also describes “holds, restrictions, and reserves” that can happen depending on activity and risk signals.

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Why this is non-negotiable for factories

A typical apparel flow looks like:

• You pay 30% deposit
• Factory buys fabric + trims
• Factory books capacity and starts cutting

Mills often want cash up front. If the factory can’t access the deposit, they either:

• delay your order, or
• bankroll your order with their own cash (many can’t), or
• refuse PayPal.

So when a factory says “PayPal causes delays,” it’s not a tactic. It’s literally how production financing works.

Chargeback and dispute fees add more pain

Even if the factory “wins,” the process costs time and sometimes fees. PayPal fee pages list chargeback fees and dispute fees (standard and high-volume dispute fees), depending on currency. That’s another reason factories hate PayPal at scale: you can lose money even while defending yourself.

Accounting and professionalism issues (yes, it matters)

This part can sound snobby, but it’s real in B2B trade:

• Factories issue Proforma Invoices (PI), then reconcile payment references.
• PayPal payments may arrive tied to an email, sometimes without clean invoice references.
• Corporate accounting teams prefer bank statements that match invoices cleanly.

Also, in many factory cultures, “PayPal for big orders” reads like:

• “Buyer doesn’t have normal trade banking”
• “Buyer expects consumer-style protection”
• “This relationship may turn into disputes”

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That perception alone can push a factory to say no.

Why Buyers Insist on PayPal

Let’s be fair. Buyers push PayPal because:

• Bank transfer can feel like zero protection
• First-time supplier risk is real
• Scams exist

=> So the best answer isn’t “PayPal bad.” The best answer is: Use tools designed for B2B trade risk—not retail disputes.

Better Payment Options for Large Apparel Orders :

If PayPal isn’t a good fit, that doesn’t mean you have to “just trust the factory” and hope for the best. The smarter move is to use payment tools that were built for B2B trade, where goods are custom-made and shipping takes weeks, not days. These options can protect both sides by tying money to clear documents, inspection results, or delivery milestones. They also keep cash flow predictable so the factory can buy fabric and pay workers on time. Below are the most common professional methods and when each one makes sense.

1) Bank transfer (T/T) + inspection milestones

Most common in apparel:

• 30% deposit by T/T
• 70% after passing pre-shipment inspection

It’s not “no protection” if you add:

• clear specs
• AQL standard
• third-party inspection
• rework/refund terms in contract

Wire fees are usually a flat cost, often tens of dollars, not a % of the whole order.

2) Escrow

Escrow is built for “both sides need protection.”

• Buyer protection without retail-style chargebacks
• Seller gets certainty once milestones are met

3) Letter of Credit (L/C)

For very large orders, L/C is old-school but strong:

• Bank-to-bank
• Document-based release (B/L, invoice, packing list, etc.)
• More paperwork, more cost, but high trust

4) Use PayPal only for small things

This is the practical compromise many factories accept:

• samples
• small dev fees
• small deposits (case-by-case)

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Then switch to T/T or escrow for bulk production.

Conclusion / Final Words

PayPal is great for small, fast, retail-style payments—but large apparel manufacturing is not a retail transaction. When order values jump into five or six figures, PayPal’s percentage fees, buyer-leaning dispute structure, and potential fund holds can turn a normal production job into a margin loss or a cash-flow crisis for the factory. On top of that, the kind of proof PayPal prefers (simple tracked delivery to a confirmed address) often does not match how bulk shipments move through freight forwarders, ports, and Bills of Lading. The result is a payment method that feels safe for buyers but can feel financially and operationally unsafe for suppliers.

If you want a smooth production process, treat payment like a professional trade tool, not a checkout button. Use bank transfer (T/T) with clear milestones, third-party inspections, or escrow/LC for higher-risk first orders. These methods protect both sides in a way that fits manufacturing realities: clear paperwork, clear timing, and clear accountability. When you choose the right payment structure, you don’t just reduce disputes—you build trust, keep production on schedule, and make it easier for good factories to say “yes” to your next order.