Multi-lender Financing in the Middle

12 Apr 2017

SNAPSHOT

Multi-lender financing, at its simplest, is an arrangement where two or more lenders agree to meet the financing requirements of a particular borrower or borrower group.  It's been going on for years at the top end of town to meet the substantial capital requirements of large corporates. In 2017, with smaller cap corporates on significant growth trajectories and hungry for more capital, it is becoming even more popular in the middle markets.

The benefits for a borrower of tapping more than one lender for funding are many and include:

  • Access to larger commitments and securing liquidity
  • Maintaining relationships with existing banks and establishing relationships with new banks
  • Access to specialist lenders and products

Likewise, for a lender financing businesses with needs toward the top end of the middle markets, there may also be a number of benefits to multi-lender financing, including:

  • Participating in even larger commitments
  • Improving relationships with existing customers by driving new opportunities
  • Diversification of risk
  • Reduced loan administration

Broadly speaking, multi-lender financing arrangements fall into one of two categories: (i) syndicated finance or (ii) club finance, each having relative advantages and disadvantages, which we address in this note.

When considering whether a multi-lender financing arrangement is right for a particular business, particularly for the first time, whether you are on the borrowing or the lending side of the table, seeking good counsel is key because the relationship dynamics and decision making processes are inherently more complex than under a simple bilateral facility. 

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