syndicated loan
A large loan provided by a group of lenders working together, allowing individual banks to limit exposure while providing borrowers access to large amounts of capital.
Example
“The $5 billion acquisition was funded by a syndicated loan involving 20 banks, each lending $250 million.”
Memory Tip
SYNDICATED loan = too big for one bank, so a SYNDICATE of banks shares the lending.
Why It Matters
Understanding syndicated loans helps borrowers appreciate how large capital needs get funded and why multiple banks can offer better rates through shared risk. For individuals, knowing this concept explains why major corporate loans or infrastructure projects become possible and how banking relationships work at scale.
Common Misconception
Many people wrongly assume that a syndicated loan means the borrower must deal with multiple banks separately and coordinate payments with each one. In reality, one bank typically serves as the lead arranger and handles all communications and payments, making the process seamless for the borrower despite the group of lenders behind the scenes.
In Practice
A company needing to borrow 500 million dollars for expansion might find that no single bank wants to lend that much due to risk limits. Instead, a lead bank arranges a syndicate where five banks each commit to lending 100 million dollars, allowing the company to close the deal while each bank keeps its exposure manageable at 20 percent of the total portfolio.
Etymology
SYNDICATED (arranged by a syndicate of lenders) LOAN. A LOAN arranged by a SYNDICATE (group) of banks.
Common Misspellings
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See Also
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