What is involved in getting a loan participation established?
Once you have identified a partner to participate in a loan, proper due diligence should always be performed on the loan to evaluate the risk involved. Following due diligence, a Loan Participation Agreement must be executed between all involved parties. The agreement should define key factors in the relationship such as the type and size of the loans, servicing and collection responsibilities, fees, and any other terms and conditions governing the relationship. For a sample Loan Participation Agreement, click here. A legal review of this document for guidance is recommended.
