Back to Back LC Issuance | Program Setup and Bank Placement

Professional Services. Back to back letter of credit program setup and bank placement. Prepared September 2025.

Back to Back LC Issuance and Program Setup

Use a buyer LC to issue a supplier LC without tying up full cash. We set up the program, draft clean text, align shipment terms, and place it with banks that know this structure. The goal is simple. Release goods on time and protect your spread.

Who it suits

Commodity traders, distributors, EPC primes that need a supplier LC backed by a buyer LC.

Typical size

USD 2m to 50m per cycle. Larger on syndication.

Rules and tenor

UCP 600. 90 to 180 days common. Match buyer and supplier calendars.

What Back to Back LC Means

The issuing bank opens a supplier LC that is supported by the incoming buyer LC. The buyer LC is not transferred. It is held as security and cash flows are ring fenced so the supplier gets paid against clean documents and the buyer LC proceeds settle the bank.

When to use

Thin balance sheet, new supplier asks for an LC, buyer is willing to issue an LC, goods are well described and documentable.

When not to use

Highly bespoke goods, shifting specs, or where shipment timing cannot be matched. Consider transferable LC or escrow in those cases.

How It Works

  1. Buyer LC draft. Align goods, latest shipment, and documents. Add assignment of proceeds if needed.
  2. Program bank. We select a bank that accepts the buyer LC as security and will issue the supplier LC.
  3. Supplier LC text. Mirror but not copy. Remove traps. Keep documents consistent and achievable.
  4. Controls. Confirm advising bank, presentation location, and title transfer terms. Set a clean cash waterfall.
  5. Issuance. Bank issues supplier LC. Shipment and documents flow. Buyer LC proceeds settle the chain.
  6. Close. Margin release and fees reconciled after clean presentation and settlement.

Pricing and Timelines

Item Typical Range Notes
Issuance fee on supplier LC 1.0% to 2.5% per annum Billed quarterly or flat for short tenors.
Confirmation fee if supplier asks 0.25% to 1.50% per annum Depends on issuing bank rating and country risk.
Arrangement fee 0.50% to 1.00% of face One time at program start or per cycle.
Cash margin 0% to 30% of face Lower if buyer LC is from a strong bank and wording is clean.
Lead time 5 to 15 business days Faster with complete documents and aligned texts.

Ranges are indicative. Final terms depend on credit, structure, and jurisdictions.

Documents We Need To Start

Buyer side

Draft buyer LC text, underlying sales contract, buyer bank details, Incoterms, shipment calendar.

Supplier side

Supplier pro forma, requested LC terms, advising bank, documents to be presented, latest shipment.

Applicant package

Company KYC, ownership chart, recent financials, bank statements, trade track record.

Controls

Cash waterfall, assignment of proceeds if used, collateral terms, title transfer wording.

Structures We Arrange

Back to back LC

Supplier LC issued against the buyer LC held as security. Separate instruments. Clean settlement chain.

Transferable LC

Buyer LC is transferred to the supplier. Works when buyer LC is marked transferable and wording allows it.

Assignment of proceeds

Buyer LC proceeds are assigned to pay the supplier. Useful for partial shipments and staged draws.

UPAS add-on

Usance payable at sight to extend tenor on the buyer side while supplier is paid at sight.

Key Risks And Controls

  • Mismatch risk. Mirror critical fields and dates. Keep documents achievable.
  • Country and bank risk. Use confirmation or change advising banks if needed.
  • Discrepancies. Pre-check documents and set a cure plan in the contract.
  • FX and price moves. Lock hedges or spreads before issuance where exposure is high.

Frequently Asked Questions

Is this the same as a transferable LC

No. A back to back LC is a new LC issued against the buyer LC as security. A transferable LC passes rights under the original LC.

Do I need cash collateral

Often a small margin is required. Strong buyer LC wording and a rated issuing bank can reduce or remove it.

How fast can we issue

Many programs go live in one to three weeks once texts match and KYC is done. Repeat cycles are quicker.

What goods qualify

Well described, standard spec, easy to evidence by documents. Commodities, industrials, packaged goods are common.

Start Your Back to Back LC Program

Share your buyer LC draft and supplier ask. We will scope pricing, margin, and a clean issuance plan.

Start Now

Disclaimer. Service is advisory and arrangement. Terms are set by issuing and confirming banks. No leased instruments. Pricing and timelines depend on credit, documents, and jurisdiction.