Westchester County Loan Participations Attorneys

Franchise Financing Lawyers for Buyers and Sellers of Loan Participations

When an entrepreneur is seeking to buy into a franchise, he or she will require a great deal of capital with which to complete the deal. Some prospective franchisees have assets of their own, while others will borrow from friends and family to get started. A large number of franchisees, however, will take out loans from financial institutions.

At Ivey, Barnum & O'Mara, LLC, our experienced franchise financing attorneys recognize that, in recent years, franchise lending has moved out of the mainstream and into a niche market that is all its own. Institutions offering franchise loans for real estate, equipment, and other needs often do not have a particularly diverse portfolio of loans, securities, and other investments. Therefore, franchise lenders cannot afford to take unnecessary risks. One option for franchise lenders to limit their possible risk exposure is by the use of loan participations.

Understanding Loan Participations

A loan participation is a financial arrangement under which an institution issues a loan to a borrower and then sells part of that loan to one or more other institutions. Unlike a whole loan sale, in which the originating bank transfers all of its interest in the loan to the seller, the originating institution in a loan participation will keep a partial interest in the loan. Called the "lead" bank, the originator of the loan will hold the loan documentation under its own name and will service the loan on behalf of any and all participants.

Loan participations are often used when the loan in question is too big for one lender to handle, either from an asset perspective or due to the risks involved. In niche markets such as franchise lending, it is not uncommon for lenders to keep standing participation arrangements with other institutions for the overall good of the market.

There are several different types of loan participations. In a standard participation, there is a contract between the lead bank and the borrower, as well as a contract between the lead bank and participating banks. In a syndication loan, there is just one contract that is signed by the borrower, the lead bank, and all participating banks—collectively called the "syndicate."

Westchester County Lawyers for Buying and Selling Loan Participations

At Ivey, Barnum & O'Mara, LLC, our attorneys represent the interests of lead banks in franchise loan participations. We realize that participations can give the originating franchise lender the ability to serve its customers' needs while staying under reasonable lending limits. Loan participations also allow the lender to diversify its risk and enhance asset liquidity.

Our lawyers also work closely with loan participation buyers. Franchise lenders may show interest in participations in order to help supplement their loan portfolios as well as for the opportunity to invest in high-dollar loans without taking on the responsibility of loan servicing or the costs of loan origination. Loan participations also help buyers to diversify their loan portfolio.

Whether you are a lender who is searching for buyers to join you in a participation loan or a would-be buyer who is considering a participation opportunity, the team at Ivey, Barnum & O'Mara, LLC is ready to help. We also assist franchisees and franchisors in protecting their rights in loan participation situations.

Call a Metro New York Franchise Financing Attorney

For more information about loan participations or any other aspect of franchise lending, contact our office. Call 203-661-6000 for a confidential consultation today. Our firm serves private and commercial clients in Westchester County, Fairfield County, White Plains, Greenwich, New York, Connecticut, and the surrounding areas.