Exploring the power of syndicated loans


Thinking about expanding your business? You may want to consider a syndicated loan to fund your company’s financial needs.

While commonly associated with large, acquisition-focused corporations, syndicated loans can offer growing middle market businesses one-stop access to more capital than traditional loans.

What are syndicated loans?

Syndicated loans involve groups of lenders or “syndicates” coming together to offer a single loan. One bank serves as lead agent or “arranger” to structure and administer the loan.

Syndicated loans can provide funding for capital expenditures, refinancing, acquisitions, leveraged buyouts, or the return of capital to shareholders.

The four main types of syndicated loans:

  • Traditional term loans stipulate a repayment schedule and have either a fixed or floating interest rate.
  • Revolving credit lines allow your business to draw down funds and repay and reborrow as needed.
  • Letters of credit (LOCs) are guarantees provided by your lenders to pay off your debt obligations if your company can’t.
  • Equipment/acquisition lines are used during a specific period to make acquisitions or purchase assets or equipment.

Gain access to growth capital.

As a business owner, you should always anticipate the next expansion steps for your company. Start by looking for other sources of capital before reaching any limits on what any single bank can lend to you.

It takes time for a lead arranger to develop a thorough understanding of your company’s growth strategy, liquidity, and cash flow—all needed to establish syndicated credit to fund your business plans.

If your company requires $10 million for working capital now but spots an opportunity for a $40 million acquisition in the future, your banker may look beyond your short-term needs and start syndicating a $50 million credit facility so you can act when ready.

For larger sums, your banker might suggest a non-bank syndication, which could include pension funds, hedge funds, or commercial finance firms.

Reduce risk for borrower and lender.

Lenders prefer syndicated loans when working with large sums because a group of bankers can provide access to more capital while sharing the risk. Syndicated loans also mitigate risk for you too since your company isn’t entirely indebted to one lender.

Syndicated loans offer your business an opportunity to establish broader financial relationships with multiple lenders. Over time, these lenders will become more familiar with your business and you’ll have more options to access capital.

Is a syndicated loan the answer to my company’s capital needs?

Syndicated loans serve advanced credit needs. Your Truist relationship manager can help you figure out whether a syndicated loan is the best capital for you.