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Definitions from the Web

Back to Back Letter of Credit

Definition:

A back to back letter of credit is a financial arrangement in which two independent letters of credit are issued by a bank. It involves the use of one letter of credit as collateral for securing another letter of credit.

Usage:

As a noun:

When a company is unable to directly fulfill its obligations under a letter of credit, it may resort to a back to back letter of credit to ensure that the payment and delivery terms are met.

As a verb:

Companies often back to back letter of credit transactions to mitigate the risks associated with international trade.

Examples:

Noun:

1. Our company opted for a back to back letter of credit to better secure the shipment.
2. The exporter requested a back to back letter of credit to ensure timely payment.

Verb:

1. The company decided to back to back letter of credit their international transactions to minimize exposure to potential default.
2. In order to facilitate the trade, the importer agreed to back to back letter of credit the purchase.

Related Products:

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