What is a loan syndication?
Loan syndication is when a group of creditors are connected to provide a large commercial loan to the debtor. For the debtor, the loan is from one creditor, so one creditor acts as the cause of the loan. Behind the scenes, however, the loan takes place across several credit institutions, which reduces the risk of failure for each of the credit institutions involved in the transaction. Corporations approach one creditor and make creditors to work as an agent to help him raise money or capital he needs for specific business purposes. The creditor responsible for the organization of a large loan and negotiations as contact between the debtor and all creditors earns a fee for his services, similar to how the mortgage broker in the residential or consumer transaction receives for the provision of loans. These institutions include commercial finances, banks and institutional investors. In addition, there are three types of subscription situations of loans: subscribed, best effort and club.
In the subscribed loan syndication, the creditor with whom the debtor approaches, an institution that provides a loan. After the loan is closed, the creditor is then a syndicate or selling parts of the loan to other creditors to expand the risk of a large amount of loan among different creditors than to keep the entire duty in their own books.
Syndication of the best efforts is when the lending group dating from the loan does not agree to finance the entire loan amount, but instead agrees with a part of the loan amount required by the debtor. The most common use of a loan to syndicate the best efforts is when the debtor has a bad credit or a bad credit. In some situations, Thdo -agreement does not have to be closed because the debtor needs the entire amount of the loan, but in other cases the debtor takes the amount that the syndication group agrees with the lending.
In the agreement on the Syndication of the Club, a group of creditors cooperates in advanceAcid detail and loan approval. In the club syndication, all involved creditors divided the amount of loans and fees charged to the debtor in the same way or almost the same. These are usually smaller loans than those involved in subscribed syndication or syndication of the best efforts.