We provide lender-ready capital raise packaging and debt or equity placement support for business owners and buyers looking to secure serious term sheets and close funding on a defined timeline.
For business owners and acquirers pursuing private debt submit your deal for review. We revert within one working day with next steps and either a quote for our services.
Finance your next trade, project or acquisition.
Debt structuring, targeted lender outreach and negotiation support through closing.
Paid advisory. Upfront retainer applies.
AI Lender Match helps business owners, investors, and sponsors identify lenders that fit their deal profile without wasting weeks on cold outreach. Get a smarter starting point for acquisitions, commercial real estate, trade finance, and structured debt transactions.
Back-to-back commodity trades are common in oil, metals and agriculture, where an intermediary buys from a producer and sells to an end buyer without ever taking physical possession of the cargo. The intermediary is exposed on both sides at once, and that exposure is managed with two linked letters of credit. The master LC protects the sale to the end buyer. The back-to-back LC protects the purchase from the supplier, and it is issued against the security of the master LC[reference:0]. The case below follows one cargo through that structure.
Supplier
Producer or refiner
Trader
Intermediary between buyer and supplier
End buyer
Refiner or distributor
Back-to-back LC
Issued by the trader's bank to the supplier, secured by the master LC
Master LC
Issued by the end buyer's bank to the trader, covering the sale
Sales and purchase contracts are signed back to back
End buyer's bank issues the master LC to the trader
Trader pledges the master LC and obtains the back-to-back LC
Supplier ships and presents documents to its bank
Documents move up the chain and each bank pays against its LC
The two LCs run in parallel, not in sequence. The back-to-back LC is issued only because the master LC exists and is held as security[reference:1].
A trader agrees to buy 30,000 metric tonnes of gasoil from a refiner and sell the same cargo to an end buyer in another market. The trader never intends to store or handle the product. The cargo will move directly from the refiner's terminal to the end buyer's discharge port, and the trader's margin sits between the two contracts.
The end buyer opens a master LC through its bank in favour of the trader. That LC is irrevocable and payable against a specific document set: a bill of lading, a certificate of origin, a quality certificate and a commercial invoice. The trader now has a bank payment undertaking, but it still has to pay the refiner. It approaches its own bank and asks for a back-to-back LC to be issued to the refiner, using the master LC as collateral[reference:2]. The back-to-back LC mirrors the master LC's key terms: quantity, shipment window, expiry and document requirements. The mirroring matters because a document that satisfies the supplier's LC must also be capable of satisfying the master LC[reference:3].
The refiner ships the cargo and presents documents to its bank. That bank checks the documents against the back-to-back LC and pays the refiner. The documents then travel to the trader's bank, which checks them against the master LC and releases payment to the trader's account, net of the amount owed under the back-to-back LC and the bank's charges[reference:4]. The trader's bank forwards the documents to the end buyer's bank, which pays under the master LC. The end buyer ultimately receives the cargo and the documents, and the trader keeps the difference between the two LC values.
In practice the document flow is not always clean. In string trades, the original bill of lading may not reach every party in time, and letters of indemnity are often used to bridge the gap so payment can be released before the endorsed bill arrives[reference:5]. That does not change the economics of the back-to-back structure, but it does add a layer of legal risk that the trader's bank will price into the facility.
Advisory
Structuring a back-to-back commodity trade?
We help traders and borrowers review LC terms, collateral arrangements and the fee stages behind a back-to-back facility before the first document is presented.
| Stage | Who acts | What moves | What triggers payment |
|---|---|---|---|
| Contract | Trader, supplier and end buyer | Back-to-back sale and purchase contracts | Signed contracts and agreed LC terms |
| Master LC | End buyer's bank | Irrevocable LC to the trader | Conforming documents under the master LC |
| Back-to-back LC | Trader's bank | LC to the supplier, secured by the master LC | Conforming documents under the back-to-back LC |
| Shipment | Supplier | Cargo and shipping documents | Bill of lading and certificate set presented |
| Supplier payment | Supplier's bank and trader's bank | Payment under the back-to-back LC | Documents checked and accepted |
| Trader settlement | Trader's bank and end buyer's bank | Payment under the master LC, net of back-to-back exposure | Documents re-presented and accepted |
The structure works because the master LC and the back-to-back LC are matched, not because the trader is trusted to pay both sides out of its own funds.
The master LC is issued by the end buyer's bank in favour of the trader. The back-to-back LC is issued by the trader's bank in favour of the supplier, using the master LC as collateral[reference:8]. The two LCs cover the same cargo but sit at different points in the chain.
Not always. The master LC acts as security, but the trader's bank will still assess the credit quality of the master LC's issuing bank, the trader's margin and any cash margin requirement. Some facilities require a cash deposit or a lien over the documents.
Often no. One purpose of the back-to-back structure is to keep the buyer and supplier separated so the trader's margin and relationships are protected. The back-to-back LC is issued in the trader's name, not the end buyer's[reference:9].
This case study is illustrative and does not describe a specific transaction. Back-to-back LC terms, collateral requirements and documentary conditions vary by bank, jurisdiction and commodity. Confirm all LC wording, document requirements and fee arrangements with the issuing banks and qualified trade finance counsel before relying on any structure described here.
Before you submit
Your financing request goes straight to the principal. You receive a written diagnosis, the proposed structure and a one-off retainer before any work starts.
Recent mandates include a USD 150m revolving credit facility and a USD 12m acquisition closed in 21 days. We are an advisory and arranging firm, not a lender, and you close directly with the lender.
Financely is an advisory and arranging firm, not a lender or broker-dealer. All financing is subject to KYC, AML, due diligence and lender credit approval. No outcome or timeline is guaranteed.