Syndicated and bilateral loans are a form of direct lending in which one or more lenders provide financing to a borrower under terms and conditions set out in a facility agreement.

The main difference between syndicated and bilateral loans is that a syndicated loan is an arrangement between an individual borrower and a group of lenders, while a bilateral loan is an agreement with only one lender. This primary difference means that syndicated loans are typically used by businesses to gain large amounts of financing. Bilateral loans usually used by small business owners looking for initial capital or funds to expand.

Two types of loan facility are commonly utilised: term loan facilities and revolving loan facilities. Under a term loan facility, the lender commits to lend to the borrower a specified amount of money over a set period of time (the “term”). The period of a corporate term loan is generally between one and five years. The loan may be repaid in instalments (in which case the facility is commonly described as “amortising”) or through one payment at the end of the facility (in which case the facility is commonly described as having “bullet” repayment terms). Prepayment of the loan is commonly permitted without penalty. A revolving loan facility is similar to a term loan facility in that it provides a borrower with a maximum aggregate amount of capital, available over a specified period of time. However, unlike a term loan, the availability period usually extends for almost the entire life of the loan, allowing the borrower to drawdown, repay and re-draw all or part of the loan at its discretion.