Different types of Letter of Credit

1) Revolving Letter of Credit:

Revolving Letter of Credit is used when the delivery of goods is in form of partial/
multiple shipments. Revolving Letter of Credit keeps on revolving and is not
restricted to a single transaction. Revolving Letter of Credit (LC) can be utilized for
subsequent business transactions over a period of time on a continuous basis to the
extent of limit sanctioned.
The seller/buyer does not have to go to the bank for sanction of fresh limits every
time he gets a new order for executing the same.
2) Back to Back Letter of Credit:
A Letter of Credit (LC) is a mode of making payments for trade transactions. An Letter of
Credit is a highly popular payment mode because it allows an importer or buyer to make
secure payments to the exporter or seller.
Back to Back Letter of Credit, one Irrevocable Letter of Credit facilitates the seller to
obtain another Letter of Credit. To obtain the Back to Back Letter of Credit the
permission of the Buyer or the applicant of the first Letter of Credit is not required. Back
to Back Letter of Credit is generally used by the middleman or agencies to hide the
identity of the real suppliers or manufacturers. The seller can utilize this Back to back
Letter of Credit as a security for his bank, to issue a back to back Letter of Credit in
favour of his suppliers in order to get a very competitive rate for his purchases and
increase his profit margin in the process. Thus this can very well be used by the seller to
raise quick funds and complete his orders in the scheduled time.Such transactions
originate when a seller receives a letter of credit covering goods which must be obtained
from a third party who in turn requires a letter of credit. The second issuing bank looks
to the first issuing bank for reimbursement after paying under the second letter of credit.
Just4uloan help you with the list of the banks and the contact details, which provides
Back to Back Letter of Credit.
3) Revocable Letter of Credit:
Revocable Letter of Credit means the payment against this L/C can be revoked by the
issuing bank. The buyer may either amend the Letter of Credit or cancel it without the
approval of the seller. The payment against Revocable Letter of Credit is not for sure and
hence this type of Letter of Credit is not commonly used.
The Seller has meager chances to get loan against Revocable Letter of Credit.
4) Irrevocable Letter of Credit:
Irrevocable Letter of Credit cannot be cancelled. This seller is assured of payment for his
supply of goods/services provided all terms and conditions of L/C are conformed to. This
mode of payment is generally used in international trade transactions.
As the payment against this Irrevocable Letter of Credit is guaranteed by the issuing bank

and the holder of this Irrevocable Letter of Credit (seller) can borrow short term finance
from any other bank or lending institution at a very low rate of interest and within a very
short time.