Controlling a Borrower's Business Without Taking Control Through the Loan Agreement

Often times, a commercial banker may want to control their commercial borrowers’ business without taking control in an effort to protect the bank’s investment. It is never advisable for any bank to dictate the day-to-day decisions of any organization otherwise; the bank may face lender liability if the borrower follows the banks instructions but fails during the process. So, how can you control a commercial borrower without taking control of their business?

Recorded Wednesday,
May 31st, 2023
Presented by Jeffery Johnson
2h total length
$279.00 or 1 Token

Includes: 30 Days OnDemand Playback, Presenter Materials and Handouts

  • Accounting/Reporting
  • Auditing
  • Commercial/Business Lending
  • Compliance
  • Lending
  • Lending Compliance
  • Management/Employee Development
  • Bank Legal Counsel
  • Branch Manager
  • Commercial Lender
  • Compliance Officer
  • Consumer Lender/Retail Banker
  • Controller/Accountant
  • Credit Analyst
  • Internal Auditor
  • Loan Closer
  • Loan Operations Manager/Specialist
  • Senior Management
  • Trainer

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All loans have Loan Agreements. However, some Loan Agreements are more tangible than others. At one end of the spectrum are lengthy agreements that have been formally drafted by legal counsel. In the middle are pre-printed Loan Agreements, usually containing a security agreement that banks may use for nearly any type of credit extended. At the other extreme are completely informal oral agreements, which have little significance.

Many financial institutions take the position that Loan Agreements are simply too complicated and often attempt to avoid using them in loan transactions. However, Loan Agreements can benefit both the lender and the borrower. While the borrower must have sufficient latitude to operate the company, certain limitations must be placed on the business due to the financial institution’s credit exposure. Provisions in the Loan Agreement must be drafted to guarantee adequate cash is conserved by the borrower to ensure continued financial viability and to repay the financial institution’s loan.

In this webinar, we will discuss formal Loan Agreements that are generally used for commercial borrowers. In general, Loan Agreements are used for the following reasons:

  • It Sets forth the agreement between the financial institution and the borrower by clearly and concisely defining the duties and responsibilities of both parties during the term of the loan
  • It Establishes restrictions and qualifications on the borrower’s activities and financial condition, which are set out by affirmative and negative covenants
  • It causes the borrower and lender to work through various contingencies thus preparing an alternative plan of action that both parties can agree to abide by should the original plan become inoperable
  • It serves as a communication tool and monitoring device by requiring the borrower to submit certain documents at specified times and to require notification of the lender about certain plans of the borrower (Example: periodic financial statements and financial projections).

What You'll Learn

  • Define the Loan Agreement
  • Know When a Loan Agreement is Required to Monitor Your Borrowers’ Activities
  • Understand the Rights Afforded by the Loan Agreement
  • Know the Key Covenants to Insert to Monitor Your Borrowers’ Financial Condition
  • Understand the Relationship of the Loan Agreement with Other Loan Documents

Who Should Attend

This informative session is designed for Chief Risk Officers, Senior Credit Officers, Senior Loan Officers, Credit Administration Officers, Loan Review Personnel, Commercial Loan Officers, Consumer Loan Officers, Branch Managers, Credit Analysts, and Special Assets Officers.

Jeffery Johnson

Instructor Bio

Jeffery W. Johnson started his career with SunTrust Bank in Atlanta as a Management Trainee and progressed to Vice President and Senior Lender of SouthTrust Bank and Senior Vice President and Commercial Banking Division Manager for Citizens Trust Bank of Atlanta.

Most of his career has been spent in Credit Administration, Lending, Business Development, Loan Review, Management and Training & Development. He has managed loan portfolios representing a cross section of loan types including: Large Corporate, High Net Worth Individual, Middle Market Companies, Small Business, Real Estate and Non-Profit Organizations.

Mr. Johnson is now a training professional in the financial industry by leading various seminars covering important topics relating to issues in financial institutions. He teaches actively for fifteen state banking associations in the United States, Risk Management Association (RMA) and individual financial institutions nationwide. He co-authored a training course entitled "Lending to Service and Other Professional Organizations" for RMA in 2001.

Mr. Johnson earned a B.A. Degree in Accounting from Morehouse College in Atlanta; a MBA in Finance from John Carroll University in University Heights, Ohio; Banking diploma from Prochnow School of Banking at the University of Wisconsin and a Graduate Certificate in Bank Management from the Wharton School of Business at the University of Pennsylvania.