Syndicated loan – definition, practical application

An ancillary loan is – contrary to the name – not a stand-alone loan but a sub- loan under an existing syndicated loan, under the terms of the syndicated loan. see for more notes

Credit in practice

Ancillary credit in practice


In practice, ancillary loans are mainly issued for guarantees, overdrafts and foreign exchange transactions. Ancillary loans, in particular, are used for lending in a currency that is not the currency of the syndicated loan.

Due to the regularly revolving nature of guarantees, current account overdrafts and foreign exchange transactions, the implementation of ancillary loans (in the case of multiple loan tranches) regularly also takes place only below the working capital tranche. Although the integration into a loan tranche with a repayment structure does not seem technically impossible, it is still not practical or even customer-oriented.

The Ancillary Loan is not transacted through the agency involved in the syndicated loan, but transacted directly between the borrower and one of the lenders.

In this case, the ancillary credit is credited on the commitment of the respective lender under the loan agreement. If the requested ancillary loan exceeds the commitment of the lender, it is likely that another of the lenders involved in the syndication agreement may also be included in the ancillary credit.

Ancillary credit is regularly granted by settling a balance / loss compensation with the loans granted under the loan agreement.




The Ancillary Loan is used in the daily practice of corporate financing, in particular to maintain the flexibility under the syndicated loan so as not to make it a rigid corset for the client. All of the above-mentioned awards (guarantees, bank overdrafts and, in particular, foreign exchange transactions) are highly event-related, difficult to plan and indispensable for everyday business.

And at this point, the syndicated loan also plays out its individual strengths:

And at this point, the syndicated loan also plays out its individual strengths:

  1. Thanks to the credit check carried out by all the banks involved in applying for the syndicated loan, this is often not necessary or not required on a large scale.
  2. Thanks to several participating banks, the customer and borrower can often select the bank that makes the most competent impression for their current event. After all, there are banks that tend to exude regional strength, and banks that have earned a particularly good international reputation.


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