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.
Loan documentation may include the Loan Agreement, any security documents, guarantees, agreements governing the relationships between the Lenders, equity or shareholder support related documentation, agreements setting out the Client’s account structure in relation to the financing and/or letters documenting fees payable to the Lenders (and/or their Agents).
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
