Hello!

This may sound like a silly question.. Would an unsecured loan to an individual to purchase 1% ownership in an automotive group of dealerships be considered CRA small business reportable? Or would it be considered personal purpose and thus not reportable? Thoughts are greatly appreciated!

Sounds like a personal investment to me rather than a business transaction. Plus, if it is unsecured, how would you ever know what was actually done with the money?

Thanks for your response!

They are also taking a negative pledge on the borrower's primary residence. I'm not sure if that makes a difference.

Well, you need to make sure that is legal in your State, you need to weigh the UDAAP aspects of involving a primary residence into a negative pledge agreement and you need to make sure that this passes the fair lending smell test.

In truth, a negative pledge agreement is basically worthless, as it does not represent a lien and if the borrower would get a mortgage on their house, your only recourse is with the borrower for a breach of contract, so you would be in the same position as if it did not exist.