Loan Documentation
From Open Risk Manual
Definition
Loan Documentation refers broadly to the documents needed to legally enforce the loan agreement and properly analyze the borrower’s financial capacity.
Common loan documents are
- promissory notes
- note guarantees, financial statements
- collateral agreements, and
- appraisals.
Issues and Challenges
- The promissory note, guarantee, and financial statement must be properly prepared and signed; the financial statement must be received and analyzed
in a timely manner by the bank; and the collateral agreement must be recorded in the appropriate jurisdiction
- When a document is missing, stale, or improperly executed, it becomes an exception. Documentation exceptions can exacerbate problem loans and seriously hamper work-out efforts