Not Your Average Lending Limit Question

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Question:

Suppose a bank has an existing loan to an entity, and the owners of the entity provide pro-rata guarantees. Later, one of the guarantors requests a loan to himself, not involving the other guarantors. How should the debts be combined and reviewed for legal lending purposes?

Answer:

You will need to review your state law to see if contingent/indirect obligations are included in the calculations.

First published on BankersOnline.com 6/07/10