Loan syndication is the process of involving several different lenders in providing various portions of a loan. Loan syndication most often occurs in situations where a borrower requires a large sum of capital that may be too much for a single lender to provide or outside the scope of a lender’s risk exposure levels. Thus, multiple lenders work together to provide the borrower with the capital needed.
Loan syndication is used in corporate borrowing. Companies seek corporate loans for a wide variety of reasons. Loan syndication is commonly needed when companies are borrowing for mergers, acquisitions, buyouts, and other capital projects. These types of capital projects often require large loans; thus, loan syndication is mainly used in extremely large loan situations.
