Syndicated Loans

A syndicated loan is a type of loan in which a collective number of banks offer funds to a single borrower. The group appoints one member that serves as agent which administers all transactions related to the loan.

Borrowing Facilities

Two of the most common types of facilities that can be syndicated are:

Term loan facility
- A specified loan amount is provided to the borrower within a definite period of time (term of the loan). The borrower can draw funds up to the specified maximum limit provided that the term or the money's availability period has not ended. Payments of the loan can be made through amortization, bullet or balloon repayment methods.

Revolving credit facility - A specified maximum amount of fund is made available to the customer over a specified period of time. The borrower can repay, draw-down and redraw loans within the loan's term. The capital can be repaid at anytime and the total amount borrowed should be fully paid at the end of the term.

Advantages of the Loan

Some of the benefits a syndicated loan offers to the borrower are:

  •     lower interest rates compared to other borrowing options like bonds
  •     a larger amount of funds is available
  •     prepayment can be made without penalty