![]() The independent agent will perform functions including processing lender trades, making interest payments, preparing and distributing financial notices, and so on. Rather than overwhelm in-house resources, a third-party loan agency can provide an efficient and convenient solution to managing loan agreements. How an Independent Third-Party Loan Agency Can Help ![]() The agent does not have any fiduciary responsibility toward the loan. The agent is responsible for carrying out the day-to-day administrative tasks governed by the credit agreement. The agent, often called the administrative agent, is the intermediary between the lender group and borrower. ![]() It will bring on other arrangers to help support the financing. The lead arranger is the financial institution that runs the transaction. The key players in a syndicated loan are the lead arranger and the agent. They also may have different structures or payment options within their credit pacts. Syndicated loans are often under intense scrutiny during due diligence, and these loans are sometimes more expensive and complex to manage. The borrower is bound to a credit agreement with all of the lenders. In this way, risk is dispersed among the group. A group of lenders contributes a portion of the borrower’s requested funds. Larger businesses often pursue syndicated loans when a financing is large and possibly risky. In some cases, if a company is deemed as risky, collateral may be pledged against the loan to ensure the lender is compensated if the borrower is unable to meet its loan obligations. A lender will determine whether to enter a bilateral loan agreement by considering the business’ creditworthiness, reputation, and previous financial history. Often targeted for smaller businesses, loan agreement terms of bilateral loans are not complex and may be flexible to some extent. Bilateral loans tend to be smaller in size and less risky and therefore, may be made between a single lender and company. Syndicated loans are often much larger in size and may also be risky, which is why a group of lenders (called a “syndicate”) are used. Understanding the difference between bilateral and syndicated loansīilateral and syndicated loans are used when companies seek funding for mergers and acquisitions, cash flow, and corporate growth purposes. Simply stated, a bilateral loan is made between a borrower and a single lender.Ī syndicated loan is made by a group of lenders to a company that is too large or risky for a single lender to hold.Ĭomplex Bilateral and Syndicated Loans: How third-party loan agency professionals may helpĪn independent loan agency may complete the day-to-day administrative tasks under a credit agreement without straining the in-house resources of the involved parties. Which loan makes the most sense for your business? The following article will help you determine which features provide the best fit and how to efficiently manage the financing. Bilateral and syndicated loans provide companies with additional capital for acquisitions, growth, and maintaining operations during distressed periods.
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