Definition

Noun: - A shared loan agreement: A "loan participation" is a single, large loan that is funded by a group of lenders (typically banks or financial institutions). These lenders combine their resources to provide credit that would be too large or risky for any one lender to provide alone. One lead bank typically originates and administers the loan, while the other participants own a share or "participation" in it.

Usage Examples

• Noun:
  • The consortium arranged a loan participation to finance the massive infrastructure project.
  • Our bank holds a 20% loan participation in the syndicated credit facility for the airline company.

Advanced Usage

• "To sell a loan participation": Refers to the process where the originating lender sells portions of the loan to other financial institutions, thereby distributing the risk.
  • The lead bank decided to sell a loan participation to reduce its exposure to a single borrower.

Variants and Related Words

• Participating loan: Another term for a loan participation.
• Syndicated loan: A very closely related concept. While all loan participations involve a shared loan, a syndicated loan is a specific, formalized type of participation where a group of lenders (a syndicate) jointly funds a single loan under one agreement.
• Loan syndication: The process of forming a syndicate to provide a loan.

Synonyms

• Shared loan
• Syndicated loan (in many contexts, this is used interchangeably, though there can be technical distinctions in financial structuring).

Related Phrases

• Loan participation agreement: The legal contract that outlines the terms, rights, and obligations of each participating lender in the shared loan.
  • All banks signed the loan participation agreement before funds were disbursed.

Noun

1. a loan that is shared by a group of banks that join to make a loan too big for any one of them alone