Syndicated loans are funds provided to a borrower by a group of lenders often referred to as a syndicate. Because the amount of syndicated loans usually exceeds the amount generally loaned by banks, the primary goal of such loans is to spread the risk of borrower default among two or more banks or investors.

The loan syndicate members play various roles with some participating as lenders and others managing the loan process. While primarily originated and underwritten by banks, many other investors and financial institutions participate as member lenders in syndicated loan agreements. These other participants include pension plans, hedge funds, insurance companies, finance firms and mutual funds. Consider the following tips to determine if syndicated loans are the right choice for your business:

1. Evaluate expenses associated with syndicated loans.

2. Determine which syndicated loan structure is best for your business.

3. Find a syndicated loans provider that meets your business goals.

Action Steps
The best contacts and resources to help you get it done

Budget for the syndicated loans list of fees

As with many other loan types, there are often fees and additional expenses associated with processing syndicated loans. These expenses and fees generally include loan interest, administration fees, underwriting fees, upfront fees, agreement fees and others.

I recommend: Wells Fargo connects businesses with a variety of capital resources for syndicated loans. The bank also provides a wealth of syndicated loan information on its website and outlines the advantages of syndicated loans to both borrowers and lenders. Citibank is also a leading U.S. bank that serves as the lead lender in syndicated loans.

Seek legal advice for assistance with negotiating syndicated loans

Syndicated loans are structured to primarily benefit the lenders, and therefore, can be structured in various ways such as floaters, fixed-rate term loans, revolving loans and lines of credit. Consulting with an attorney can help you in negotiating the terms of syndicated loans and ensuring that your interests as a borrower are protected.

I recommend: Bracewell & Giuliani has extensive experience in advising both lenders and borrowers on syndicated loan agreements. Baker & McKenzie banking and finance attorneys represent borrowers and financial institutions on a range of loans including syndicated loans and bilateral loans.

Work with an international syndicated loans provider

To lessen the impact in the event the borrower defaults on the syndicated loan agreement, the risk is spread among several banks and financial institutions. To prevent risk, the group of lenders will conduct an extensive credit worthiness review of all borrowers.

I recommend: You can find syndicated loans opportunities in developing nations from the International Finance Corporation (IFC), part of the World Bank. Acting as the lead bank, IFC provides syndicated loans to commercial banks and other financial institutions. Bank Leumi USA is an Israeli bank that participates in syndicated loans for businesses operating in a broad range of sectors.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Syndicated loans can be an inexpensive way to raise capital, because this loan type offers the ability to borrow more funds and the opportunity to build multiple financial relationships.