Back to Back LC

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Are you involved in buying and selling activities? Or even foreign transactions? You need a document that guarantees your purchase and payment. A letter of credit does that for you.

We at Alliance Digital Corporation Banque help you get the back to back letter of credit, allowing financing a transaction on time. This LC is mainly used when there is an intermediary involved between the buyers and sellers. They can be a broker or suppliers.

Back to back LC majorly consist of two distinct letters of credit. One of them is issued by the bank to the intermediary. While the second one is issued by the intermediary’s bank to the buyer. They mainly serve the purpose of trading between parties that are at a far-off distance, and the verification of each other’s credit is difficult otherwise.

Here is how we at Alliance Digital Corporation Banque carry out the process of back to back LC:

  • The first half of this process is similar to a commercial LC. The buyer needs to go to the bank, get an LC and send it to the intermediary’s bank. This is called the principal LC.
  • Next, the intermediary requests the other bank for another LC. This second one is called the back to back LC.
  • Following this, the cargo is transported by the supplier to the original buyer.
  • Finally, the supplier’s bank sends the documents and makes the payment.
  • Upon the delivery of goods, the payment is made by the buyer’s bank.

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