BUSINESS

Reviewed by Andy Smith
Fact checked by Yarilet Perez

Loan Syndication vs. Consortium: An Overview

A loan syndication and consortium may sound the same but there are structural and operational differences between the two. A loan syndication is a group of lenders that offer a large loan to a borrower. As such, a syndicate loan is one large loan with multiple lenders that provide a portion of it. A consortium, on the other hand, is a group of individuals or entities that pool their resources toward a given objective. A consortium is usually governed by a legal contract that delegates responsibilities among its members.

Key Takeaways

• Loan syndications are generally reserved for loans involving international transactions, different currencies, and necessary banking cooperation.
• A consortium is usually governed by a legal contract that delegates responsibilities among its members.
• Consortium financing occurs for transactions that might not otherwise take place with a single lender.

Loan Syndication

A loan syndication involves multiple lenders and a single borrower. The syndication is headed by a lead bank that is approached by the borrower to arrange credit for major projects, equipment purchases, and merger and acquisition (M&A) deals. The managing bank is generally responsible for negotiating conditions and arranging the syndicate. In return, the borrower generally pays the lead bank a fee.

Loan syndication is the most common way for corporations to seek financing from banks and other lenders. In Europe, loan syndication is primarily driven by private equity sponsors, while in the U.S., corporate borrowers and private equity sponsors drive the loan syndication market in equal measures.

The lead bank in a loan syndication is not necessarily the majority lender. Any of the participating banks may be the largest lender, even if they are not the lead bank, depending on how the credit agreement is drawn up.

Because loans involve very large sums of money, there is a considerable amount of risk that comes with lending to the borrower. One lender would assume a great deal of risk. But, multiple lenders participating in a syndicate spread out the risk in case the borrower defaults.

Important

A loan syndication is similar to a consortium, although there are structural and operational differences between the two.

Consortium

Consortium financing occurs for transactions that may not take place with a single lender. Several banks agree to jointly supervise a single borrower with a common appraisal, documentation, and follow-up. These lenders own equal shares in the transaction. Unlike a syndication, there is not one lead bank that manages the financing project. Instead, all of the banks play an equal role in managing the project.

Consortiums are not built to handle international transactions like a syndication loan. Instead, it may arise because the size of the project is simply too large or too risky for a single lender to assume. While loan syndications typically work across borders and may handle financing in different currencies, consortiums typically occur within the boundaries of a given nation.

Sometimes the participating banks form a new consortium bank that functions by leveraging assets from each institution and disbands after the project is complete. By allowing all of the members to pool their assets, consortiums allow smaller banks to tackle larger projects.

Key Differences

	Loan Syndicate	Consortium
Purpose	Financing transactions	Financing transactions
Structure	Multiple lenders with a lead bank	Legal entities with equal ownership
Arrangement	Lead bank negotiates terms	Collaborative arrangement between

Who Does the Borrower Pay in a Loan Syndication?

The lead bank in a syndicate acts as the agent or loan manager, facilitating the financing and contact between the borrower and other banks. As such, the borrower pays the lead bank. This bank divides the loan payment among the others in the syndicate.

What Is a Consortium Bank?

A consortium bank is a bank that is created by multiple banks to fund a large project. The purpose of the financing is usually too much for one bank to handle, which is why the consortium bank is established. Each member has an equal share of the consortium bank. As such, none of them has a controlling interest. This means that decisions are made mutually.

Are There Any Disadvantages to Loan Syndication and Consortiums?

Yes, there are certain drawbacks associated with both loan syndication and consortiums. Both can take time to complete, which can hold up financing. Loan syndication often comes with additional costs, including higher fees. Consortiums are collaborative agreements, which means the liability is shared among members.

The Bottom Line

A company that requires a large loan for a project or deal may seek financing through a loan syndication or consortium. A syndication involves multiple banks that come together, spread the risk, and offer one loan to the borrower. A consortium, on the other hand, occurs when several banks form a collaborative agreement and have equal ownership in their lending agreement with the borrower.

Fact checked by Suzanne Kvilhaug

If you’re expecting your 2024 federal tax refund to arrive in the mail, it might be the last time you get a paper check from the Internal Revenue Service (IRS). Under a new executive order signed by President Donald Trump, the U.S. Treasury will stop issuing all paper checks by Sept. 30, 2025, including for tax refunds.

That means going forward, most taxpayers will need to receive their refunds electronically through direct deposit, a debit card, or other digital payment methods. If you’re not prepared, your next refund could be delayed—or worse, never arrive.

Key Takeaways

• Starting in September 2025, the IRS will no longer issue paper checks for tax refunds.
• Refunds will be issued via direct deposit, prepaid debit cards, or digital wallets, unless you qualify for one of the limited exceptions.
• To avoid delays, taxpayers should confirm their banking information and update their payment preferences with the IRS now.

Why Is the IRS Eliminating Paper Checks?

According to the White House, the move to digital payments is all about making government payments more efficient, affordable, and secure.

“President Trump is cracking down on waste, fraud, and abuse in government by modernizing outdated paper-based payment systems that impose unnecessary costs, delays, and security risks,” stated the White House fact sheet about the March 25 executive order.

From a practical and economical standpoint, digital payments are the way to go in the modern age. Electronic transfers are much faster than printing and mailing a check, and maintaining the infrastructure to process and digitize paper reportedly costs taxpayers more than $657 million in 2024.

There’s also the security factor. U.S. Treasury checks are 16 times more likely to be lost, stolen, or tampered with compared to electronic transfers. Meanwhile, check fraud is rising: A 2025 survey by the Association for Financial Professionals found that 63% of organizations experienced check fraud in 2024. Going digital is expected to reduce those risks significantly.

How Will American Taxpayers Get Their Refunds?

Starting in fall 2025, all tax refunds will be issued using electronic funds transfer (EFT) methods. That includes direct deposit into a bank account, prepaid debit cards, or digital wallets.

The IRS will no longer issue paper refund checks unless you qualify for a specific exception, including:

• Taxpayers who don’t have access to a bank account or digital payments.
• Emergency payments where electronic payments would “cause undue hardship.”
• Security or law enforcement-related cases where non-electronic transactions are “necessary or desirable.”

In these instances (and any other circumstances where the Secretary of the Treasury deems it necessary), the Treasury will make accommodations for an alternative payment method.

Can You Still Pay Taxes by Mail?

In most cases, no. The government is phasing out incoming paper payments, too. That means if you’re currently paying your taxes, fees, or fines by check, you’ll need to start doing so by card or digital wallet beginning later this year, unless you qualify for one of the limited exceptions outlined in the executive order.

How to Prepare for the Treasury’s Paper Check Phase-Out

If you normally receive your tax refund via check, now’s the time to set up an electronic payment method. Here’s how to prepare:

• Set up for electronic payments: If your next tax return indicates that you are owed a refund, opt for direct deposit or another digital payment method when you file.
• Update your bank account information: The IRS has your information on file. Use the agency’s “Where’s My Refund?” tool to manage your payment preferences.
• Open accounts: If you don’t have a checking or savings account, consider opening one or exploring prepaid debit card options. According to the executive order, the Treasury will work with financial institutions and consumer groups to support unbanked and underbanked Americans through this transition.

Taxpayers who meet one or more of the exemption criteria will need to apply for an exception through the Treasury. Guidance on how to do this has not yet been issued at the time of writing.

The Bottom Line

The end of paper refund checks marks a major shift in how Americans receive money from the government. If you rely on paper checks for your refund, take steps now to update your payment method before the Treasury’s September 2025 deadline. Getting ahead of the curve will help ensure your next refund arrives quickly, securely, and without issue.