Loan Documentation

From Open Risk Manual
Revision as of 09:56, 14 October 2021 by Wiki admin (talk | contribs) (Issues and Challenges)

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