Participation Loan
A lending arrangement where two or more lenders share a single loan, with each holding a proportionate interest in the payments and risk. The lead lender (participant) typically originates, underwrites, and services the loan, while co-participants fund portions of the principal. Participation structures allow lenders to diversify risk, stay within regulatory lending limits, or fund larger transactions than their balance sheet would otherwise permit. Borrowers benefit from accessing a larger loan amount through a single point of contact.
Related Terms
Portfolio Loan
A commercial real estate loan that the originating lender holds on its own balance sheet rather than selling into the secondary market. Portfolio loans offer more flexibility than securitized products in terms of underwriting, prepayment, and loan modifications because the lender retains the decision-making authority. Banks, credit unions, and some life insurance companies are the primary portfolio lenders. Borrowers benefit from direct relationships with decision-makers and the ability to negotiate customized terms.
Senior Debt
The primary mortgage loan that has first priority claim on a property's cash flows and collateral. Senior debt sits at the top of the capital stack with the lowest risk and lowest cost of capital. Senior lenders are repaid before any subordinate financing or equity in case of default or sale.
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