In
finance, "participation" is an ownership
interest
In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distin ...
in a
mortgage
A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any ...
or other
loan
In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that ...
. In particular, loan participation is a cooperation of multiple lenders to issue a loan (known as participation loan) to one borrower. This is usually done in order to reduce individual
risk
In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environm ...
s of the lenders.
The term is also used as a synonym to profit sharing, an
incentive whereby employees of a company receive a share of the profits of the company.
References
*''
Black's Law Dictionary''
Loans
Business law
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