Legal Definitions - transferable letter of credit

A transferableletter of credit is a type of letter of credit that allows the beneficiary (the person who will receive payment) to transfer their right to receive payment to another party. This means that the beneficiary can use the letter of credit to pay someone else for goods or services.

For example, let's say that Company A wants to buy goods from Company B, but Company A doesn't have a good credit rating. Company A can ask their bank to issue a transferable letter of credit to Company B. Company B can then use the letter of credit to pay Company C for the goods. This way, Company A doesn't have to worry about their credit rating, and Company B can still get paid.

Another example is when a company wants to subcontract part of a project to another company. The original company can use a transferable letter of credit to pay the subcontractor for their work.