Bank Loan Syndication

A syndicated loan is a loan in which a group of lenders with same or different lending policies lend to a single borrower. This loan is usually taken by the borrowers who want large lump sum amount to be financed and hence is offered loan syndication that is many lenders lend money to borrowers on different or same interest rates and conditions agreed by all the lenders. Business plan preparation must include the detailed information about term loans, syndication loans etc so there is a more effective and efficient business plan.

Bank loan syndication is a way of helping any organisation who is not able to raise funds or have less capital which is needed in operation. Under syndicated bank loan group of different lenders lends to a sole business either on same or different strategies regarding lending. Usually bank loan syndication is done in business plan preparations to encourage people with business mind or idea but lack due to capital or fund raising issues.

Collaboration of various lenders is done to lend money or to finance a single borrower who is lacking in business operation due to shortage of capital. Bank loan syndication involves the term loan which means a monetary loan which is repaid to lenders after a specific period of time.

Bank loan syndication is taken when borrower is in need of huge capital to invest. The borrower can be a corporate firm, organisation, or government who wants a financial intermediary to meet his need of huge capital. Syndication loan process involves leader who performs all the duties or administrator tasks of all the syndicate members.

Bank loan syndication process involves three main members

  • Lender
  • Borrower
  • Agent

Bank loan syndication process involves request by borrower for loan to agent and negotiation between them takes place and then agent sends this request with all negotiation to lender and make negotiation and then all these negotiation with lenders are discussed with borrower and after they all agree a loan is granted to borrower by group of lenders who agree on all the terms and have common aspect.

There are 3 types of syndication loans:

  • underwritten deal
  • club deal
  • best efforts syndication deal

FAQs :

1. What is bank syndication?

A banking syndicate is not a permanent entity, but forms specifically to handle a deal that might be too difficult or too risky for a single underwriter or borrower to handle.

2. What do you mean by loan syndication?

Loan syndication is the process of involving a group of lenders to fund various portions of a loan for a single borrower.

3. Why do banks syndicate loans?

A syndicate is a group of banks making a loan jointly to a single borrower. Typically, a bank may not lend to any one borrower an amount in excess of 15 percent of its capital. Participating in a syndicated loan thus allows a small bank to make a loan to a large borrower it could not otherwise make.

4. What is a syndication agent?

A bank or financial institution that acts as agent for a group of lenders (known as a syndicate) in the syndication of a loan.


5. What does a syndicate do?

A bank or financial institution that acts as agent for a group of lenders in the syndication of a loan.

6. How do syndicates work?

A syndicate entry allow you to share system entries and prizes with other players. Syndicates allow you to cover more numbers by sharing the cost between the members of a group.