Back to Back LCīack-to-back LC is an LC that commonly involves an intermediary in a transaction. They can be further classified into Time Based (Could be Cumulative or Non-Cumulative) and Value-Based. For more information, click on Revolving LC. When a single LC is issued for covering multiple transactions in place of issuing a separate LC for each transaction is called a revolving LC. Mostly the letters of credit are unconfirmed letter of credit.
The following are the different types of letters of credit:Ī letter of credit that is assured only by the issuing bank and does not need a guarantee from the second bank. Some of these are classified by their purpose.
There are various types of letter of credit in trade transactions. At times, another bank is involved as an advising bank that advises the beneficiary. A letter of credit has three important elements – the beneficiary/seller who is the recipient of the LC, the buyer/applicant who buys the goods or services, and the issuing bank that issues the LC on the buyer’s request. An LC is a financial document provided by a third party (with no direct interest in the transaction), mostly a bank or a financial institution, that guarantees the payment of funds for goods and services to the seller once the seller submits the required documents.
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