Explain Loan Syndication
#1
Loan syndication is the process of involving several different lenders in providing various portions of a loan.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.
if a company wants a huge amount as a loan for expansion or any other purpose, say when Reliance or ITC wants money, loans are got from the banks. But generally, its got from a single bank and that single bank alone shares the risk. Take the case of funding a rocket launch - if the launch is a failure, then the bank which funds for it may become bankrupt. But in syndication, many banks come together and fund a single project, hence sharing the risks. This also assists in getting competitive interest rates for the banks. Generally, when a group of banks get together, they select a lead bank which handles all the dealings with the company, such as negotiating the interest rates, and hence a deal is signed between the company and the banks. Loan syndication is basically done to share the total loss or liability.
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#2
good information and very briefly discussed...
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#3
[quote='neetubm' pid='8595' dateline='1262107870']
great information. keep sharing
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#4
Smile 
[quote='neetubm' pid='8595' dateline='1262107870']
Loan syndication is the process of involving several different lenders in providing various portions of a loan.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.
if a company wants a huge amount as a loan for expansion or any other purpose, say when Reliance or ITC wants money, loans are got from the banks. But generally, its got from a single bank and that single bank alone shares the risk. Take the case of funding a rocket launch - if the launch is a failure, then the bank which funds for it may become bankrupt. But in syndication, many banks come together and fund a single project, hence sharing the risks. This also assists in getting competitive interest rates for the banks. Generally, when a group of banks get together, they select a lead bank which handles all the dealings with the company, such as negotiating the interest rates, and hence a deal is signed between the company and the banks. Loan syndication is basically done to share the total loss or liability.
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