LOAN SYNDICATION

by Anshika
Meaning

Loan syndication is a lending process in which a group of lenders

provide funds to a single borrower.
 Loan syndication most often occurs when a borrower requires an
amount that is too large for a single lender and greater than the
bank's risk tolerance.
Firms seek corporate loans for a variety of reasons including
funding of mergers, acquisitions, buyouts and other capital
Expenditure projects.
 1. Pre-mandate Stage The borrower initiates the first stage. In this stage,
Process the borrower contacts a single lender or invites competitor bids from
multiple lenders. After the lead bank is chosen, the appraisal process
starts. The lead bank will look after the needs of the borrower and will
design a loan structure for the borrower. A credit proposal will also be
developed.

2. Loan Syndication This stage involves the lender placing the loan and
disbursement. The lead bank will prepare a term sheet, an information
memorandum, and legal documentation in order to sell the loan at the
marketplace

3. Post-Closure Stage This stage involves monitoring through an escrow

account. An escrow account is an account in which the borrower deposits
revenue. It is the agent’s responsibility to prioritize the loan repayment. The
agent also needs to ensure that the payment is made before making
payments to any other parties. It is the duty of the agent to manage the
running and operating of the loan facility on a regular basis
Advantages

It facilitates the borrowing of a large amount by

companies and businesses to fund big projects.

It reduces the effort of the borrower to arrange a large

sum of money.

Since multiple lenders are involved, It allows the borrower

to enjoy varying interest rates and different loan structures
 Disadvantages

The process of bringing multiple lenders on board is a time-

consuming process, which may delay the project for which
funding is required. 

It may be challenging to satisfy every lender’s terms and

conditions. 
 ICICI
Bank
Borrower 1000 crores Lead bank

company Project A
HDFC participants SBI
X Bank

Axis bank
Thank you