Syndicated loan

A syndicated loan is nothing more than a special kind of lending, which is characterized by an average maturity granted to borrowers not just one but several banking structures. It means that the funds of these banking structures are pooled.

Syndicated loan is not recognized as a separate way of lending. In fact, it is only one of many forms suitable for borrowers and lenders.

Syndicated loan, its forms

An important feature of this loan is that it is issued in very large amounts. In some cases, the loan amount can reach twenty million US dollars. It is for this reason that only legal entities have the right to receive it. Borrowers can be holdings, companies, large enterprises, various financial structures. Often borrowers act as banks. There were cases when it was used by the state.

The syndicated loan has several forms. Here are the main and most popular of them:

- share. Its peculiarity is that it is issued simultaneously by several banks that jointly implement loan agreements. In this case, they can sell their participation in the transaction;

- The club. Funds are fully provided by the management group of banks.

Syndicated loans are largely specific. Their main advantages are as follows:

- when it is received, a certain schedule is drawn up. This schedule should be, first of all, convenient to the borrower. On it further payments will be made;

- a borrower can get a multi-currency loan. Also worth noting that the currency at any time can be changed;

- all banks that take part in lending are in the same conditions. This means that the costs of debt can be significantly reduced;

- a special consortium group is created. She makes out a package of documents, specifies all credit requirements, determines the possible risks. All this shortens the terms of obtaining a loan. The reception circuit itself is also simplified;

- As mentioned above, the size of the syndicated loan is very large. The amount that is issued with it can not be issued by any single bank. In some cases, large enterprises can take the funds necessary for the further development and reorganization of only a few banks at once.

Of course, only specialized banks are involved in issuing syndicated loans. They are something of an organized group that performs various functions. We are talking about the main, organizational, administrative functions. Payments are made through the administration bank.

All banks that participate in issuing such a loan have many advantages. The syndicate for financial banking structures is convenient because the risks of each of the banks are significantly reduced. It is important to note that the consortium that was created by the banks is not permanent, but exists only within the framework of certain projects.

Before receiving a syndicated loan, the borrower will need to decide on which bank structures he would like to receive the necessary cash. Practice shows that in order to avoid any kind of paperwork, and simply for convenience, borrowers turn to those banks that they have been advised by acquaintances or to those with whom they themselves cooperated earlier.
After necessary checks and determination of the amount of the syndicated loan, a meeting is held, at which representatives of all interested banks should attend. All conditions for further work are determined precisely on it.