Loan Participation Note (LPN)
A fixed-income security that permits investors to buy portions of an outstanding loan or package of loans. LPN holders participate, on a pro rata basis, in collecting interest and principal payments. Banks or other financial institutions often enter into loan participation agreements with local businesses, and also offer loan participation notes as a type of short-term investment. Investopedia Says:
To meet the needs of local borrowers and to increase loan income, many community banks use loan participation agreements in which one or more banks share in the ownership of a loan. Community banks have also formed lending consortiums, such as the Community Investment Corporation of North Carolina (CICNC), an affordable housing loan consortium that provides long-term, permanent financing for the development of low- and moderate-income multifamily and elderly housing throughout North and South Carolina. Related Terms:
Bond
Collateralized Debt Obligation - CDO
Collateralized Loan Obligation - CLO
Note
Securitization |