I have a Promissory Note that states a principal amount of $2,000,000. Here is the question: The loan approval states a Commitment Amount is the lesser of $2,000,000 or the Borrowing Base which is only $675,000. For call report purposes, the loan was reported as a small business loan. Should the $675,000 be reported as a CRA Small Business loan?

I guess I'm just a bit confused. How can you have a Note, which is a legal obligation, for more than the maximum amount you are willing to lend?

If perhaps the Note has a provision that the maximum availability is based on a formula derived from an existence of facts that are separate and apart from the note, then I would still say your original amount is $2,000,000, and the limitation is a technicality that could change if the outside circumstances change.

That said, it would appear that the loan does not qualify for reporting as a small business loan since the Call Report instructions state:

Quote:

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For purposes of this schedule, "loans to small businesses" consist of the following:
(1) Loans with original amounts of $1 million or less that have been reported in Schedule RC-C, part I,
item 1.e, column B, "Loans secured by nonfarm nonresidential properties" (in domestic offices), and
(2) Loans with original amounts of $1 million or less that have been reported in Schedule RC-C, part I:

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You probably want to check with your Regulator on this one for two reasons:
1. To make sure your CRA data will be accurate.
2. To make sure your Call Report is accurate!

Is this an Accounts Receivable Line with a borrowing base at the day it was signed of $675M?

It sounds somewhat like that to me, which means that you really have a LOC for up to $2MM depending on the AR's that the line is based on. Each time a draw is made the AR's are reviewed. All approved receivables are added into the factor and a draw is allowed up to a certain percentage of the receivables, which we call the "borrowing base".

Because the obligation is above $1MM it would not be reportable, nor would each of the draws on the borrowing base.