What Is Bilateral Debt?

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Bilateral loans are arranged directly between borrower and lender.
Bilateral loans are arranged directly between borrower and lender. (Image: LuminaStock/iStock/Getty Images)

In a business context, a bilateral debt is a simple loan arrangement between a single borrower and a single lender. Such loans are called "bilateral" because there are only two parties to the loan, each with an obligation to the other: One will provide a specific amount of money under the terms of the loan agreement, and the other will repay the money as provided for in that same agreement.

Bilateral vs. Syndicated

The term bilateral debt doesn't get used much, because people just call it "debt." Most personal and business debt is bilateral debt: You borrow money from one party, and you repay only one party. The alternative to bilateral debt is syndicated debt, in which money is provided by a group of lenders, and the borrower has separate obligations to each lender. Syndicated loans are usually arranged by corporations borrowing money for big projects.

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