Professional Service. Term sheet prepared September 2025. LC issuance is subject to bank underwriting and approval.
Back-to-Back Letter of Credit (LC) Term Sheet
Issue a supplier LC secured by an incoming buyer LC. We structure mirror terms under UCP 600, align documentation to avoid discrepancy traps, and add confirmation where required. Margin financing can be arranged separately for applicants that need cash margin support.
When To Use
Intermediary traders that receive a buyer LC but must pay an upstream supplier by issuing a second LC. Useful where the incoming LC is not transferable or where commercial terms need to be ring-fenced.
How It Works
Incoming LC is taken as collateral. Issuing bank for the supplier LC mirrors core terms (amount, shipment, expiry) with controlled differences. Collections from the buyer LC repay the supplier LC exposure.
Bank Categories
Issuance and advising through investment-grade international banks, established regional commercial banks, or specialist trade correspondents with experienced documentary units.
| Indicative Back-to-Back LC Term Sheet | ||
|---|---|---|
| Item | Term | Comment |
| Applicant | Intermediary trader with audited accounts | Receives buyer LC and issues supplier LC |
| Instrument | Irrevocable Documentary LC under UCP 600 | Sight or usance; transferable status typically no |
| Collateral | Incoming buyer LC assigned/pledged to issuing bank | Cash margin may still be required |
| Face Value | Deal dependent | Normally ≤ incoming LC face value |
| Tenor | Matched to incoming LC | Buffer days to protect presentation timelines |
| Availability | Single transaction or revolving line | Aggregate limits and reinstatement by agreement |
| Confirmation | Optional for supplier LC and/or incoming LC | Used to mitigate issuer or country risk |
| Cash Margin | % of face value, case by case | Structured margin finance available for eligible applicants |
| Controls | Assignment of proceeds, escrow waterfall, aligned document lists | Strict cure windows; synchronized shipment/expiry |
| Fees & Pricing | Issuance/confirmation fees set by banks | Arrangement and underwriting fees — request a quote |
| Documentation | Incoming LC, supplier contract, draft supplier LC text, insurance, inspection | Full KYC/AML and sanctions clearance for all parties |
| Conditions Precedent | Executed agreements, funded/financed margin, accepted LC texts | Collateral assignment of incoming LC perfected |
| Governing Rules & Law | UCP 600; facility law and dispute forum specified | Local counsel opinions where required |
Process And Timeline
Share incoming LC draft/final, supplier contract, shipment plan, and corridor. Preliminary KYC and sanctions screening conducted.
Provide audited financials, corporate docs, proposed supplier LC text, insurance and inspection terms, and proof of incoming LC authenticity/advising.
Receive an indicative back-to-back LC term sheet covering mirror structure, buffers, bank categories, and margin requirements. Arrangement fee: request a quote.
Issuing bank reviews applicant credit, collateral assignment of incoming LC, synchronization of shipment, expiry, and presentation timelines.
If cash margin is needed, applicant funds it or applies for structured margin financing. Separate approvals, covenants, and controls apply.
Lock down both LC texts. Align document lists, inspection windows, and tolerance clauses. Build buffers so supplier LC presentation precedes buyer LC deadlines.
Supplier LC is issued via SWIFT and advised to the supplier. Incoming buyer LC is confirmed/acknowledged and assigned to the issuing bank as collateral.
Add confirmation on one or both credits where country/bank risk requires it and limits allow.
Supplier ships and presents under supplier LC. Beneficiary presentation is examined; documents are managed to ensure compliance and sequencing.
Payment under supplier LC is matched with proceeds from the incoming buyer LC per the assignment and escrow waterfall.
Provide settlement confirmations, any amendments, and reconciliation across both credits for audit and covenant compliance.
Request Your Back-to-Back LC Term Sheet
Upload your incoming LC, supplier contract, and draft supplier LC text. We align mirror terms, select credible issuers and confirming banks, and arrange margin financing where eligible. Underwriting and arrangement fees are quoted after review.
Start Your LC RequestDisclaimer. This term sheet is indicative. Final issuance, confirmation, and pricing are determined by banks following credit approval. Margin financing is a separate facility subject to its own underwriting. Synchronization risk between the two credits is managed through buffers and controls but cannot be eliminated.
