Transferable Letter of Credit Vs Back-to-Back Letter of Credit

A Back-to-Back Letter of Credit involves the issuance of two letters of credit to finance a single transaction when a middleman is involved between the buyer and seller, such as a retailer or broker. It enables the first beneficiary to transfer the original LC as a payment security in favor of the second beneficiary, ie. the supplier.

But a Back-to-Back LC is a bit different from a transferable letter of credit. Here, Instead of issuing an LC to the supplier, the first beneficiary requests the buyer to issue a transferable LC in favor of the second beneficiary.