Competitive Bid Option

DEFINITION of 'Competitive Bid Option'

A form of the commercial loan syndication where banks submit competing bids on a loan. They can also sell their portion of the participation in a loan to other parties. The borrower has a choice of banks to choose from, and will generally pick the lender with lowest rates and/or fees. In most cases, the leading bank in the syndicate allocates the majority of the actual loan balance to other lenders and only keeps a small percentage of the loan for itself.

BREAKING DOWN 'Competitive Bid Option'

Competitive bid options are usually priced at just above the lender's cost of funds, or an index such as the LIBOR. The competitive bid process for commercial and industrial loans with U.S. banks closely resembles the tender panel process in the Eurocredit market. In this arrangement, several banks bid to buy short-term corporate notes via a revolving underwriting facility.

RELATED TERMS
  1. Syndicated Loan

    A loan offered by a group of lenders (called a syndicate) who ...
  2. Loan Syndication

    The process of involving several different lenders in providing ...
  3. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  4. International Competitive Bidding ...

    In financing arrangements involving the World Bank, a bidding ...
  5. Loan Commitment

    A loan amount that may be drawn down, or is due to be contractually ...
  6. Commercial and Industrial (C&I) ...

    Any type of loan made to a business or corporation and not to ...
Related Articles
  1. Markets

    What is a Syndicated Loan?

    A syndicated loan is one that involves a group of lenders (called the syndicate) who pool their lending resources to make a loan.
  2. Managing Wealth

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
  3. Retirement

    Getting A Loan Without Your Parents

    Use the 5 "W"s to finance your dreams without banking on a second signature.
  4. Markets

    Tips To Improve Chances Of A Small Business Loan

    Enhance your small business loan eligibility by keeping these important tips in mind.
  5. Personal Finance

    Student Loans: Private Loans

    While federal loans should always be your first borrowing choice, they may not cover your full tuition – never mind lab fees, books, and room and board. That's where private loans come ...
  6. Investing

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  7. Managing Wealth

    How To Pick The Right Lender When Refinancing A Mortgage

    Refinancing your mortgage has never been easier with the range of lenders and access to information that are available to you.
  8. Personal Finance

    Student Loans: Federal Loan Consolidation

    Federal loan consolidation is a helpful tool for converting an unmanageable payment into a manageable payment by combining multiple semester loans into one loan and extending your repayment schedule. ...
  9. Personal Finance

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  10. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
RELATED FAQS
  1. How risky is a syndicated loan for the lender?

    Read about risks associated with the syndicate loan market, including the problems of adverse selection and asymmetric information ... Read Answer >>
  2. What are the typical repayment terms for a syndicated loan?

    Learn more about syndicated loans and how they are structured, specifically including the typical repayment terms for a syndicated ... Read Answer >>
  3. What is considered a reasonable interest rate for a syndicated loan?

    Discover how syndicated loans work, why they are beneficial for businesses, and what is considered a reasonable interest ... Read Answer >>
  4. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  5. What is the difference between a fixed annual percentage rate (APR) and a variable ...

    Fixed ARP and variable APR loans operate differently but serve the same purpose: to collect interest from a borrower so the ... Read Answer >>
  6. When is an underwriting fee too high on a commercial loan?

    Learn about underwriting fees and when they're too high. If the underwriting fee exceeds 2% of the total loan size, the fee ... Read Answer >>
Hot Definitions
  1. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  2. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  3. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  4. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  5. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
Trading Center