I want to setup a back-to-back supply contract.

Question

What is the finance structure I can use.?
If it is cash based what insurances do I need?
How would the LC match each each other between buyer and supplier?
What would be my risks through the transaction?

Answer

Hi Vernon

This is a question more for a solicitor. Thankfully, I’m a solicitor too!

Depending on what you’re trying to do, the back to back has to be carefully drafted to ensure that your payment terms are equivalent to when you get paid. If you already have access to finance, you need to be able to call upon it at the appropriate time.

Again, without the details, I cannot offer you any help on the insurance.

As for the LC, it would very much depend upon the price you pay and the price you are being paid. I assume that you would be getting a margin for the prices.

Finally, as for risk, it is quite risky and you need to get proper advice on this. Again, this depend on the situation you’re in.

Sorry for the vagueness of my reply but if you need any assistance, check our my firm (thelegaldirector.co.uk). We should be able to put you in touch with a lawyer near to you.

Thanks.

Kiley

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