Loan Syndication

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DEFINITION of 'Loan Syndication'

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 either be too much for a single lender to provide, or may be outside the scope of a lender's risk exposure levels. Thus, multiple lenders will work together to provide the borrower with the capital needed, at an appropriate rate agreed upon by all the lenders.

INVESTOPEDIA EXPLAINS 'Loan Syndication'

Mainly used in extremely large loan situations, syndication allows any one lender to provide a large loan while maintaining a more prudent and manageable credit exposure, because the lender isn't the only creditor. Loan syndication is common in mergers, acquisitions and buyouts, where borrowers often need very large sums of capital to complete a transaction, often more than a single lender is able or willing to provide.

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