Back to Back Letter of credit

A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money you’ve borrowed plus interest.

Mortgage loans are used to buy a home or to borrow money against the value of a home you already own.

Seven things to look for in a mortgage

  • The size of the loan
  • The interest rate and any associated points
  • The closing costs of the loan, including the lender’s fees
  • The Annual Percentage Rate (APR)
  • The type of interest rate and whether it can change (is it fixed or adjustable?)
  • The loan term, or how long you have to repay the loan
  • Whether the loan has other risky features, such as a pre-payment penalty, a balloon clause, an interest-only feature, or negative amortization

Are you involved in buying and selling activities? Or even foreign transactions? You need a document that guarantees your purchase and payment. A letter of credit does that for you. 

We at Bandenia Challenger Finance help you get the back to back letter of credit, allowing financing a transaction on time. This Letter of Credit is mainly used when there is an intermediary involved between the buyers and sellers. They can be a broker or suppliers. 

Back to back Letter of Credit majorly consist of two distinct letters of credit. One of them is issued by the bank to the intermediary. While the second one is issued by the intermediary’s bank to the buyer. They mainly serve the purpose of trading between parties that are at a far-off distance, and the verification of each other’s credit is difficult otherwise. 

Here is how we at Bandenia Challenger Finance carry out the process of back to back Letter of Credit:

  • The first half of this process is similar to a commercial Letter of Credit. The buyer needs to go to the bank, get an Letter of credit and send it to the intermediary’s bank. This is called the principal Letter of Credit. 
  • Next, the intermediary requests the other bank for another Letter of Credit. This second one is called the back to back Letter of Credit. 
  • Following this, the cargo is transported by the supplier to the original buyer. 
  • Finally, the supplier’s bank sends the documents and makes the payment. 
  • Upon the delivery of goods, the payment is made by the buyer’s bank