Ally Law member Kemp Strang, based in Sydney, Australia, has published a white paper on multi-lender financing, the arrangement by which two or more lenders agree to meet the financing requirements of a particular borrower or borrower group. While multi-lender financing has been widely used to meet the substantial capital requirements of large corporates, today it is becoming even more popular in the “middle markets” corporates (typically those corporates borrowing up to $200 million) on significant growth trajectories and hungry for more capital.
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
As to the last point, the introduction of specialist lenders and a wider variety of finance products that multi-lender financing permits creates value for corporate borrowers. For example, in the last 12 months, Kemp Strang has seen the introduction of specialist agrifinance lenders, construction finance lenders and surety/bonding line providers to existing relationships with mainstream commercial banks (not all in a single transaction!).
Similarly, 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
Multi-lender financing arrangements generally fall into one of two categories: (a) syndicated finance or (b) club finance, each having relative advantages and disadvantages. Kemp Strang addresses these issues in its white paper. The relationship dynamics and decision making processes are inherently more complex under a multi-lender situation than under a simple bilateral facility.
To determine whether a multi-lender financing arrangement is right for your business, particularly if you are considering it for the first time, and whether you are on the borrowing or the lending side of the table, seek counsel from your Ally Law member firm. For more information about Ally Law member firm services and outstanding lawyers, contact us at email@example.com.