Whether you’re looking for working capital for your own business or want to expand your business investments, syndicate lending offers an opportunity. Syndications make business investing easier for both sides of the transaction and make it possible for start-ups to get the money they need to take their business to the next stage, even when they would otherwise struggle to get a traditional small business loan. Here is what every new company owner needs to know about this kind of business financing in New York, NY.
What is syndicate lending?
Syndicate lending—also known as syndicated advances and syndication investment—is very similar to crowdfunding. It allows business investors to fund small businesses in various stages of growth without taking on the full burden of the risk themselves. The investments of the syndicate are pooled together and loaned to the business, so each investor is only exposed for the amount that they contribute to the overall investment.
What is the benefit?
This kind of lending is beneficial to business investors because they can take a chance on contributing to a start-up with a loan that may be too risky to take on as a whole. By banding together, investors can mitigate their risks, set themselves up for a strong return, and build the strength of the business community by helping new entrepreneurs become established. For business owners, syndicate lending is easier and faster to get than a traditional small business loan. Because the loans repayments are taken as a portion of future sales, there are fewer hoops to jump through to be approved.
How are loan syndicates managed?
Generally, a syndication management service will handle the transactions on behalf of various lenders, collecting the capital and distributing repayments. The management company will work with the entrepreneur to establish repayment terms and to collect those payments. This alleviates the confusion of multiple lenders attempting to collect payments individually.