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DC Comparison
Find out which one works best for you
A Documentary Credit (DC) can be confusing. Even after you've decided to use a DC, you still need to decide which type best suits your needs.
At its most basic a DC is an undertaking by a bank to make a payment, provided the terms of the credit are met. It is a promise to pay.
The main distinguishing feature among the various types of DCs is that some are more suited to transactions involving middlemen or traders.
Below is a quick reference guide to choosing the most common types of DCs.
| Documentary Credits |
Back-to- Back DCs |
Transferable DCs | Transferred DCs | Standby DCs | |
| Specific to transactions involving traders | No | Yes | Yes | Yes | No |
| Buyer requires credit facility to issue DC | Yes | Yes* | Yes | No | Yes |
| Degree of freedom to specify terms of DC | High | Medium** | High | Low | High |
| Supplier guaranteed payment if terms are met | Yes | Yes | Yes | Yes*** | Yes |
| DC issued on a transaction by transaction basis | Yes | Yes | Yes | Yes | No |
| Ease of supplier to obtain finance | High | High | High | Medium | High |
* Yes, but terms may be better due to support of 'Master' DC.
** Medium (some terms to follow 'Master').
*** Yes, if the terms of the Transferable DC are met.
For an in-depth analysis of the payment method best suited to your needs, please contact us.
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