Back-to-Back & Transferable LC Solutions
Unlock supplier terms and keep margin intact by structuring the right LC path. Financely designs and coordinates back-to-back and transferable letters of credit so intermediaries and aggregators can execute larger orders with limited collateral. We select banks, draft wording under UCP 600 or ISP 98, set clear presentation rules, and manage issuance through drawdown. No em dashes are used in this document.
Snapshot:
Bank lists and confirmation options. Clean wording and schedules. Back-to-back mirroring with risk buffers. Single or multiple transfers with control of unit prices and dates. E-presentation where accepted. Full document checks and settlement tracking.
What Financely Delivers
- Instrument selection and ruleset alignment for UCP 600 or ISP 98.
- Wording that mirrors upstream and downstream obligations without leaking margin or dates.
- Issuer and confirmer shortlist by jurisdiction, appetite, and fee grid.
- Transfer conditions, partial shipment logic, and presentation place set in writing.
- Document templates, pre checks, and courier or e-presentation coordination.
- Live liaison with bank operations from draft to SWIFT to settlement.
When These Structures Fit Best
Structure |
Best Use Case |
Notes |
Back-to-Back LC
|
Trader has a master LC from the buyer and needs to issue a supplier LC without extra cash collateral |
Downstream LC mirrors master LC with buffers for dates and specs |
Transferable LC
|
Beneficiary wants to transfer drawing rights to one or more suppliers while keeping price and margin private |
First beneficiary can substitute invoice and draft and adjust unit prices |
The LC Pathway In Four Steps
Step |
Back-to-Back LC |
Transferable LC |
1. Set
|
Review master LC. Draft supplier LC with earlier shipment and presentation dates and tighter specs |
Confirm transferability and conditions. Set limits on partial transfers and substitutions |
2. Issue
|
Issue downstream LC from the trader’s bank against the master LC as security plus any margin |
Transfer rights to the second beneficiary. Keep price and quantities aligned to protect margin |
3. Present
|
Supplier presents under downstream LC. Trader presents under master LC using substituted documents |
Second beneficiary presents to the transferring bank. First beneficiary substitutes invoice and draft as needed |
4. Settle
|
Proceeds from master LC settle supplier LC. Buffers prevent timing gaps |
Payment flows through the transferring bank. Differences in price settle to the first beneficiary |
Risks And How We Control Them
Risk |
What Can Go Wrong |
Control |
Date slippage |
Supplier shipment or presentation later than master LC windows |
Earlier shipment and presentation dates on supplier LC. Built in buffers and partials |
Doc mismatch |
Specs or descriptions do not mirror, causing refusals |
Exact mirror of key fields. Pre checks and specimen sets before shipment |
Issuer risk |
Seller will not accept the issuing bank |
Add confirmation or use a stronger advising bank acceptable to the seller |
Margin leakage |
Transfer reveals price or allows uncontrolled amendments |
Use substitution rights and limit transferable fields. Lock amendment controls |
Bank And Compliance Checklist
- Clean KYC for all parties and clear trade purpose.
- Sanctions screening on counterparties, vessels, and ports where relevant.
- Full set of contracts, POs, or pro forma with Incoterms and specifications.
- Draft LC text with place of presentation, exam time, and accepted electronic channels.
- Plan for partial shipments, part draws, and insurance evidence where required.
FAQ
Which ruleset should we use
UCP 600 is standard for LCs. ISP 98 can work well if standby mechanics are needed. We align wording to the chosen ruleset and the bank forms.
Can a transferable LC be transferred more than once
Usually once only. Some banks allow multiple transfers if the original LC permits it. We confirm limits before drafting.
How do we protect price and margin
Use substitution of invoice and draft. Control which fields are transferable. Keep quantities and unit prices within agreed caps.
What if the seller rejects the issuer
Add confirmation from a bank the seller accepts. We negotiate fees and timelines up front.
Build Your LC Path The Right Way
Send the buyer draft, supplier term sheet, and any bank forms. We will return a written plan with wording, banks, confirmation options, and a timeline to issuance.
Submit RFQ
Financely provides LC structuring and coordination through regulated partners. We are not a bank and do not issue letters of credit. All transactions are subject to KYC, AML, sanctions screening, and bank approvals. Rulesets applied include UCP 600 and ISP 98 as agreed by the parties. Nothing on this page is an offer or a commitment to finance.