analyse the benefits to a company in seeking out a syndicated loan

Expert Solution

Syndicated loans are loan given to single borrower by the pool of lenders/Banks working together. One of the lender/Bank would act as arranger to facilitate the transaction.

Advantages to company borrowing syndicated loans-

1. Borrowing large amount of funds from syndication which would otherwise be difficult to arrange from single lender.

2. Diversification of exposure for the company as borrowed from various lenders using syndication, thus reducing exposure risk to great extent.

3. Company need to negotiate and deal with the arranger of loan only and not with all the banks involved in syndication which reduces cost as well as time.

4. Syndication provides flexibility in terms of the loan borrowed. Company can borrow at different interest rate, currency, etc. This reduces interest, currency risks for company.

5. Syndication provides good opportunity to network among banking community , thus creating good reputation for the company. This helps in future financing requirement.

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