Loan Documentation
From Open Risk Manual
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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