Introduction

Loan syndication is a practical way for mid-market companies (typically requiring $5M–$200M of debt) to secure financing for acquisitions, buyouts, or significant capital expenditures. In my 15 years advising middle-market clients, syndication consistently enabled deals that would have been too large or too concentrated for a single bank’s portfolio.

How the process works (step-by-step)

  • Lead arranger/agent: A bank or financial institution structures the loan, underwrites initial credit, negotiates terms and sells portions to other lenders.
  • Syndication: The arranger invites other commercial banks, regional lenders, credit funds or private lenders to join the facility at defined participation levels.
  • Documentation: The syndicate executes a credit agreement, security documents and often an intercreditor agreement if multiple security layers exist (see our guide on intercreditor agreements).
  • Agency and servicing: The agent bank manages covenant monitoring, collections and reporting on behalf of the group.
  • Secondary trading or participations: Portions of the loan may be sold or transferred between lenders over time.

Benefits for mid‑market borrowers and lenders

  • Borrowers: Access to larger amounts of capital, potentially competitive pricing, and one coordinated negotiation rather than multiple separate loans.
  • Lenders: Diversified exposure, fee income from arranging, and the ability for smaller banks to participate in larger credits.
  • Market signal: A properly syndicated facility can validate a borrower’s credit in the eyes of other lenders and investors (see our borrower guide to syndication).

Key terms and points to negotiate

  • Pricing structure: Fixed margin, SOFR-based margins, front-end fees and commitment fees. As of 2025, syndicated business loans typically reference SOFR-based rates rather than LIBOR.
  • Covenants: Financial covenants (EBITDA, leverage ratios), negative covenants and reporting requirements.
  • Security and ranking: Priority of collateral, intercreditor terms and any carve-outs for junior lenders.
  • Commitment size and allocation: How much each lender will take and the syndicate’s standby commitments.

Typical timeline and eligibility

  • Timeline: From initial mandate to full syndication usually 4–12 weeks for a mid-market deal; complexity (cross-border, multiple collateral types) can extend this.
  • Eligibility: Mid-market companies with stable cash flow, clear use of proceeds, and credible projections attract syndicates. Private equity–sponsored deals often secure syndication more easily due to sponsor support and predictable exit plans.

Risks and common pitfalls

  • Misaligned lender priorities: Not all lenders have the same hold horizon or workout approach; negotiating an agent-friendly governance structure is critical.
  • Underestimating fees and covenant burden: Borrowers sometimes accept tighter covenants or higher fees to close quickly—this can restrict operational flexibility.
  • Documentation complexity: Intercreditor and security structures can add material legal and operational cost; counsel experienced in syndicated deals is essential.

Real-world example (condensed)

A mid‑sized manufacturer sought $20M for capacity expansion. The lead arranger took $8M and syndicated the balance to five regional banks and a credit fund. The deal closed in six weeks with a SOFR-based margin, a two-year amortization schedule, and standard reporting covenants. The borrower achieved growth without overconcentrating risk on one lender.

Practical tips from experience

  1. Prepare bank‑grade financials and a detailed use‑of‑proceeds memo to shorten diligence.
  2. Choose an arranger with a credible mid‑market syndication track record in your industry.
  3. Push back on unnecessary covenant tightness and ask for step‑downs tied to deleveraging milestones.
  4. Clarify the agent’s duties and the process for waivers or defaults in the credit agreement.

Further reading and sources

Professional disclaimer

This article is educational and reflects general industry practice as of 2025. It does not constitute personalized financial, legal or tax advice. Consult a qualified advisor or lender for guidance tailored to your company’s circumstances.