Sample Business Loan Questionaire

Member Business Lending Controls
Business Loan Definition ( “Member business loan” or “MBL” includes any loan, line of credit, letter of credit, or any unfunded commitment to make a loan, where the borrower intends to use the proceeds for any of the following purposes: (a) commercial; (b) Corporate;(c) Investment property; (d) Business venture; or (e) Agriculture. Exemptions. The following are not MBLs: (a) A business loan fully secured by a lien on a one to four family dwelling that is the member’s primary residence; (b) A business purpose loan fully secured by shares or deposits in the credit union making the extension of credit or in other credit unions, or by deposits in other financial institutions; (c) One or more business purpose loans to a member or any associated member which in the aggregate do not exceed $49,999.  The entire amount of such a loan that exceeds this figure, or that causes the aggregate to exceed this figure, is a MBL; (d) A business purpose loan where a federal or state agency (or any political subdivision of a state) fully insures repayment, or fully guarantees repayment, or provides an advance commitment to purchase in full; or (e) A loan granted by a corporate credit union to another credit union.)
INITIAL ASSESSMENT
Yes/No COMMENTS
Does the credit union grant member business loans, as defined in WAC 208-460-010?  (See definition above.)
Complete Remainder of Business Loan Questionnaire
Business Loan Policy Yes/No COMMENTS
1.  Has the Board adopted specific, written member business loan policies and procedures?  WAC 208-460-040
2.  Does the Board review the policy at least annually?  WAC 208-460-040
3.  Do the policies address the following at a minimum:   WAC 208-460-050
a. Types of business loans that will be made?  WAC 208-460-050(1)
b. The credit union’s trade area for business loans?  WAC 208-460-050(2)
c. Maximum amount of credit union assets, in relation to net worth, that will be invested in business loans?  WAC 208-460-050(3)
d. Maximum amount of credit union assets, in relation to net worth, that you will invest in a given type of MBL?  WAC 208-460-050(4)
e. Maximum amount of credit union assets, in relation to net worth, that will be loaned to any one member or associated members, subject to WAC 208-460-070?  WAC 208-460-050(5)
f. Minimum qualifications and experience of personnel involved in making and administering business loans?  WAC 208-460-050(6)
g. Analysis of the ability of the borrower to repay the loan based on the source of repayment?  WAC 208-460-050(7)
h. Receipt and periodic updating of financial statements and other documentation, including tax returns? WAC 208-460-050(8)
i. Are the following considerations addressed, unless the Board finds they are not appropriate for a particular type of business loan and states the reason for those findings in the written policies:
1. Balance sheet analysis?  WAC 280-460-050(9)(a)
2. Cash flow analysis? WAC 280-46-050(9)(b)
3. Income statement?  WAC 280-46-050(9)(c)
4. Tax data?  WAC 280-460-050(9)(d)
5. Analysis of leveraging?  WAC 280-460-050(9)(e)
6. Comparison with industry average or similar analysis?  WAC 280-460-050(9e)
j. Collateral requirements, including loan to value ratios, appraisals, title insurance requriements,  steps to secure various types of collateral, and how often the value and marketability of collateral is reevaluated?  WAC 208-460-050(10)
k. Appropriate interest rates and maturities of business loans?  WAC 208-460-050(11)
l. General MBL procedures which include: (a) Loan monitoring; (b) Servicing, and follow-up; and (c)  Collection? WAC 208-460-050(12)
m. Identification, by position, of those senior management employees prohibited from receiving business loans under WAC 208-460-020?  WAC 208-460-050(13)
n. Guidelines for the purchase and sale of MBLs and loan participations, if the credit union engages in such activity? WAC 208-460-050(14)
General Yes/No COMMENTS
1.  Does the aggregate amount of member business loans to any one member or associated members exceed the greater of 15% of the credit union’s net worth, or $100,000? WAC 206-460-070
2.  If yes, has the credit union obtained DCU approval?  WAC 208-460-090(3)
3.  Does the aggregate amount of member business loans exceed the lesser of 1.75 times the credit union’s net worth, or 12.25% of the credit union’s total assets?  WAC 208-460-130
4.  If yes, has the credit union been granted an exception from the aggregate MBL limit?  WAC 208-460-150
5.  Does the aggregate amount of development and construction loans exceed 15% of the credit union’s net worth?  WAC 208-460-030(1) (The sum of all construction loans can’t exceed 15% of the credit union’s net worth, however, the credit union can exclude any portion of the loan that is: (a) Secured by shares or deposits in the credit union or in other credit unions, and by deposits in other financial institutions; or (b) Insured or guaranteed, or subject to an advance purchase commitment, by any state or federal agency (or a political subdivision of a state).)
6.  If yes, has the credit union obtained DCU approval?  WAC 206-460-090(1)
7.  Do any of the credit union’s MBLs have a loan to value ratio in excess of 80%, in violation of WAC 206-460-090(2) or (3)?
8.  If yes, has the credit union obtained DCU approval?  WAC 208-460-090(2)
9.  For development loans, does the borrower have a minimum of 30% equity interest in the project being financed?  WAC 208-460-030(2)(a)
10.  If yes, has the credit union obtained DCU approval?  WAC 206-460-090(1)
11.  For construction or combination development and construction loans, does the borrower have a minimum of 25% equity interest in the project being financed?  WAC 208-460-030(2)(b)
12.  If yes, has the credit union obtained DCU approval?  WAC 206-460-090(1)
Business Loan Review
1.  Are the following items properly executed and recorded: Yes/No COMMENTS
a. Note?
b. Security Agreement?
c. Contracts?
d. Liens?
2.  Is the borrower’s legal form of organization documented?
3.  Are the principals in the business identified?
4.  Are complete financial statements in file with supporting schedules and tax returns?
5.  Are collateral conditions and value determined by independent qualified appraisers?
6.  Is periodic review of the financial condition documented?
7.  Do loan officers make regular on-site inspections of business sites and collateral?
8.  For development and construction loans, does the credit union release funds according to a pre-approved draw schedule and only after on-site inspections by qualified personnel, documented in writing?  WAC 208-460-030(3)
9.  If no, has the credit union obtained DCU approval? WAC 208-460-090(1)
10.  For development and construction loans, does the credit union utilize the services of a person with at least five years of direct experience in this type of lending? WAC 208-460-030(4)
11.  If no, has the credit union obtained DCU approval? WAC 208-460-090(1)