Loan Documentation

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