Imagine you're involved in a complex international transaction, but you don't quite trust the other party. A Back-to-Back Letter of Credit can help! It involves two separate letters of credit working together. The buyer's bank issues one letter of credit to the seller, guaranteeing payment. However, the seller might need financing upfront to fulfill the order. So, the seller's bank can issue a second, back-to-back letter of credit to the seller, using the first letter of credit as collateral. This provides a layer of security for everyone involved in the transaction.
