Syndication of Loans

When two or more persons or companies give loan to one borrower, it is called syndication of loans. One side creditors are group of companies and other-side, borrower will be single.


Example 

1. For example, for giving loan to A Company, B,C and D company has collected $ 10 million. If A company will default all will share loss with equal ratio 1/3.

2.

Main benefits of syndication of loan is following. 

1. Risk of  loss due to default of single borrower will share among the group of lenders.

2. With the help of syndication of loan, single borrower can big amount in the form of loan.

3. If there are large number of lenders. They can contract each other for limiting the loan and risk.

4. Syndication of loan gives the birth of syndicated loan market where big project can easily completed with taking of loan from large group of lenders.

5. Less Pressure on Single bank for giving loan.

6. Easier Management


Underwrite the Syndication of Loan 


In the underwritten contract of syndication of loan, a person or company contract with borrower in which he guarantee to collect the amount of loan from different lenders and give to borrower. If there is shortage of loan, he or she or same company will fulfill this shortage.


Team of Syndication of Loan


You know to arrange big loan for govt. is not easy. So, different group of lenders play different role in the team of syndication of loan. following are its main parts.

 1. arrangers

 2. lead banks

3. lead lenders