📄 Back-to-Back Letter of Credit (L/C)
US Capital Private Bank Knowledge Base
📖 What is a Back-to-Back Letter of Credit?
A Back-to-Back Letter of Credit (L/C) is a secondary letter of credit issued by a bank on behalf of a buyer who already holds a primary L/C in their favor. This secondary L/C is issued to the supplier to finance the same shipment or transaction stipulated in the primary credit.
⚙️ How Does it Work?
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The buyer holds a primary letter of credit issued by their bank.
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The buyer requests a back-to-back L/C to be issued to their supplier.
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The terms of both letters of credit are nearly identical—except for the amount and expiration date.
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Documents presented under the back-to-back L/C are used to claim payment under the primary L/C.
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The buyer/beneficiary of the first credit substitutes the draft and invoice presented by the supplier with their own documents.
💡 Why Use a Back-to-Back Letter of Credit?
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To facilitate complex international trade transactions.
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To enable buyers without sufficient funds to finance suppliers directly.
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To allow the buyer to use the primary L/C as collateral for a secondary credit.
📚 Related Terms
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Letter of Credit: A bank’s payment guarantee to the beneficiary upon presentation of specified documents.
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Supplier: The party providing goods or services under the back-to-back credit.
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Buyer: The party requesting the back-to-back letter of credit.
📞 Contact US Capital Private Bank
📧 Email: customerservice@uscapitalprivatebank.com
🌐 Website: https://uscapitalprivatebank.com
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