In a perfect world, loan repayment would come from
the primary sources highlighted in the loan
approval memo – income from operations or from
leases and rents for commercial real estate.
Unfortunately, primary repayment
sources can fail or become subject to local economic conditions.
When that happens, secondary repayment sources, such as guarantors or individual co-borrowers, must be relied upon. In
some cases, collateral may have to serve as a
tertiary repayment source.
This presentation will
highlight factors that should be considered when evaluating
individual guarantors and co-borrowers.
Collateral analysis will not only focus on commercial real estate, where value is relatively easily defined,
but also consider other types of collateral,
such as equipment, accounts receivable, and inventory.
- Analysis of individual guarantors
and co-borrowers, including global cash flow, contingent
liabilities, and pass-through entities
Types and differences of entity ownership, leading to an
understanding of who should serve as guarantor, including the concept of the limited guaranty
Regulation B considerations when requiring co-borrowers or guarantors
- Lending against non-real estate collateral, such as
accounts receivable, inventory, and equipment
- Common gaps in collateral analysis and considerations when lending
against non-real estate collateral,
including the borrowing base certificate
- Appraisal exemptions, proper use of abundance of caution, and collateral
monitoring after loan origination
in the above topics as identified by external loan review and regulatory agencies
Aaron Lewis, Young & Associates, Inc.