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Loan syndications often require high fees because of the vast reporting and coordination required to complete and maintain the loan processing. Fees can be as high as 10% of the loan principal. Example of a Loan SyndicationWhat is a syndicate fee structure?
What is a syndicate fee structure? Borrowers pay various fees to participant lenders according to the syndicate fee structure, such as upfront fee, commitment fee, facility fee and letter of credit fee, depending on the role on the participant. A significant amount of bank income in the syndicated loan market comes from such fees.What is a syndication deal?
What is a syndication? In simple words, it is a deal between a sponsor and the passive investors. A sponsor on the deal is the person with relevant experience in the field who finds a suitable project for the investor and finalizes the deal. The investor can be an individual or a group.What are the sources of income for Syndicate participants?
To encourage lender participation in syndicated transactions, higher fees may have to be paid. The fees syndicate participants receive and the interest on the loan are the sources of potential income. Certain fees are shared among syndicate participants according to their role in the syndicate and level of participation in the financing.