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Participation

November 3, 2015 • 2 min read

Various financial institutions can allow lenders to participate in the funding of a loan. At Yieldstreet originators can sell as much as 100% to nearly 5% of the loan. The percentage involved will vary from the situation, as this is dependent on the deal at hand.

Essentially participation will involve multiple lenders simultaneously if one lender cannot cover all portions of the loan.

Why is Loan Participation beneficial?

One can think that loan participation can offer a wide range of benefits to both lenders and borrowers. Here is a look at some of the benefits associated with loan participation:

Financial Liquidity: Some financial institutions or lenders will sell off parts of a loan to improve their financial liquidity. Participant sharing means that these lenders can lower the financial and management risks that can be associated with their portion of the loan.
Shared Responsibilities: If the primary lender has sold off parts of the loan, participants can share loan responsibilities based on the amount purchased – lowering the risk management of each lender.
Larger Loans: With more than one lender involved, financial institutions can fund large loans for borrowers. This enables them to have sufficient funding for participating loans and provide funding to other borrowers.
Sharing Profits: Lenders that buy-in loan participation will be able to share in the profits generated by the primary financial institution. Collaborating with lenders that have large market influence can help these institutions generate more business and overall financial stability.

Bank Loan Participation

Some banks and credit unions will purchase parts of a loan to broaden their lending portfolios. When banks participate in loan purchasing, it helps to diversify financial involvement and market influence. Additionally, these institutions will participate in loans to increase demand for lending services when demand thereof has decreased.

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