Loan Participation

Question 1

What is a Loan Participation?

Answer 1

1.) Is a sharing or selling of interest in a loan
2.) Lender sells ownership interest to another investor while still holding title to loan
3.) Allows investor to Participate in the lending arrangement without direct relationship with Borrower

Question 2

A lender may sell Participation to?

Answer 2

1.) Enhance their liquidity
2.) Manage Interest Rate Risk
3.) Increase Capital while still maintaining a relationship with borrower

Question 3

Participation Agreement

Answer 3

Governs the sale and purchase of the participation in the loan

Question 4

Master Participation Agreement

Answer 4

Multiple participation are set out under this

Question 5

The parties to a Participation Agreement

Answer 5

Grantor - Seller
Participant - Buyer

Question 6

Participation Agreement details

Answer 6

1.) Mechanics for the sharing of payments
2.) Cost and Expenses
3.) Voting Rights
4.) Indemnification
5.) Standard of care provisions
6.) Right to ELEVATE the participation in the loan to an assignment