The examiners are here and have run into a "situation" and I need your help!

They are looking at small business loans and have found that in a number of cases we do not collect financial information because it is a $10,000 loan to John's dba which is a mom and pop operation.

Anyway they are saying that we need to have documentation in the file of the annual revenue or these should be reported as a gross annual revenue code 3. Now if the revenue did play a part in the making of the loan and we talked with the customer about their revenue, how should it be coded? Again we do not have finanicial statements or tax returns in the file, however we are a small town bank and we go to mom and pops every so often to get what we need. We know then and we know that they do not make millions in their small business because of the type of business it is and the market that it serves. And we often get verbal confirmation of the revenue.

Thanks in advance for your help!

Jennifer:
I am stumped as to why they are concerned with annual revenue if the bank did not collect and use it for underwriting the loan. I have been laboring under the impression that any loan less than $1 million was considered a small business loan. I hope you get some other responses.

They seem to agree that they are small business, however, they are stating that because we didn't document the revenue of the business that we should not be able to code the revenue as 1 or 2. We often have verbal confirmation and internal knowledge of the gross annual revenues however the examiners are looking for documention.

I have created a generic form to be used in the future where the customer checks a box attesting to whether the gross annual income is "less than or equal to $1 million" or "over 1 million". The examiners seem to feel that this should be enough.