Unitranche Financing

Exploration Essay

Unitranche is a form of financing often used by mid-sized companies to help fund acquisitions. Typically, a normal acquisition loan consists of several different loans from various lenders. This would make a complicated and time taking process as each loan would operate separately with its own credit agreements and terms of services. However, with unitranche financing, the loan is simplified and everything gets combined into one loan from one financial institution. There are many benefits to this type of system however, the most important three include higher chances of getting the loan, a simpler structure, and a reduced cost. Negotiating many loans at the same time can be a tough job. You have to convince every financial institution why giving you money would be a good idea and the plan you have in order to return it back. However, with unitranche, the number of loan institutions you would have to talk to gets reduced to one. Like this, not only does the time you spend talking to them become less, but you would also have a much higher chance of securing the deal considering the fact that you now only have to convince one institution. Next, you can set up your payment structure to whatever that fits your company. There would be only one set of payment plans for you to think through rather than multiple as compared to typical loans so you could plan it any way that you would think would be a suitable option for your company without having to think about how you would pay back your other debts. Lastly, your costs would become significantly less. Having a single loan reduces costs as you would only need one set of legal documents and lawyers. At the same time, you would be paying interest to only one institution as compared to the average of two or three in typical financing.