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Syndication
Also called participation, co-funding, syndicating a deal.
Several funders each putting up part of one advance or loan and sharing the return in proportion, while one of them contracts with the merchant and services the deal.
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What it means
The lead funder underwrites, signs the agreement with the merchant, funds, and collects. Participants — other funders, ISOs putting their own money in, or private investors on a syndication platform — take a percentage of the position and receive that percentage of every dollar collected. Their exposure is to the deal's performance, and to the lead's competence in collecting it.
From the merchant's side nothing looks different. One contract, one company name, one debit. The existence of participants is invisible unless the agreement discloses it or an assignment notice arrives later.
It matters at two moments. On a settlement or restructure request, the lead may need participant consent or may be constrained by the participation agreement's terms, which slows and narrows what can be agreed. And on a default, participants may push for enforcement the lead would otherwise have deferred.
Where this one catches people
Merchants negotiating a hardship arrangement assume the person on the phone can decide. On a syndicated deal the lead's discretion is limited by agreements with parties the merchant has never heard of and cannot address. A flat refusal to restructure sometimes has nothing to do with the merchant's situation and everything to do with who else owns a slice.
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Syndication — common questions
What does syndication mean?
Several funders each putting up part of one advance or loan and sharing the return in proportion, while one of them contracts with the merchant and services the deal.
Where does syndication catch people out?
Merchants negotiating a hardship arrangement assume the person on the phone can decide. On a syndicated deal the lead's discretion is limited by agreements with parties the merchant has never heard of and cannot address. A flat refusal to restructure sometimes has nothing to do with the merchant's situation and everything to do with who else owns a slice.
Is syndication the same as an interest rate?
Syndication is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does syndication apply to?
Merchant Cash Advance, Working Capital.
Is there a worked example of syndication?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside syndication?
Assignment of contract, Independent sales organization, Participation, Servicing, Settlement.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.