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Drive-By Loans
Practical Law Glossary Item 7-518-8847 (Approx. 2 pages)
Glossary
Drive-By Loans
Business jargon for loans that have a short window between launch and closing, sometimes lasting only a few days. Arrangers pre-market these loans to potential syndicate members ahead of their official launch. Borrowers use drive-by marketing strategies to take advantage of pricing volatility in the market by launching the deal when loan pricing is favorable.
When banks are more risk averse, they find drive-by deals more attractive because of their shorter commitment periods. Drive-by loans may typically be either:
- Refinancing deals by well-known borrowers, which are generally marketed to the borrower's existing lenders.
- Fast-track acquisition financing deals, sometimes structured as refinancings with add-on acquisition financing.
Drive-by loans are less common in the middle market segment of the loan market, particularly in the traditional middle market with loans of less than $100 million.