Syndicated Loan

Key Highlights

• A syndicated loan is a big loan given to one borrower by a group of lenders, called a syndicate, who team up to share the funding and the risk.

• It’s used when a single lender can’t or doesn’t want to cover the whole loan alone because it’s too large.

What is Syndicated Loan?

A syndicated loan is a big loan given to one borrower by a group of lenders, called a syndicate, who team up to share the funding and the risk. It’s used when a single lender can’t or doesn’t want to cover the whole loan alone because it’s too large.

Key Features

• Team of Lenders: Multiple banks or financial institutions chip in to provide the loan.

• One Borrower: The borrower could be a company, government, or a big project.

• Lead Bank: One bank takes charge, organizing the group, setting terms, and handling payments.

• Shared Risk: Each lender only takes on the risk for their portion of the loan, so no one is on the hook for the whole amount.

• One Contract: Everyone signs a single agreement that spells out the rules.

• Big Money: These loans are usually for huge sums, often over $1 million, used for things like mergers, acquisitions, or major projects.

Why it Matters?

• It lets borrowers access huge amounts of money that one lender couldn’t provide alone.

• Spreads the risk across multiple lenders, making it safer for them.

• Keeps things simple for the borrower with one set of terms instead of juggling multiple loans.