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#1978830 - 11/24/14 11:39 PM Gross Annual Revenues to report
Moman Offline
Platinum Poster
Joined: Jul 2004
Posts: 505
WA
We have a loan to a start-up LLC (#1) as the sole borrower; we also have 2 individuals as well as an LLC (#2) as guarantors.

The 2 individuals guaranteeing the loan are the sole members of #1, and are two of six members (all individuals) in entity #2.

When addressing affiliates, the below is given in the Getting It Right Guide to CRA, and it seems to address entities controlling entities, not individuals controlling entities when defining affiliates usable for Gross Annual Revenue purposes. We considered $2Mil in revenues on the loan to LLC #1, all of which came from LLC#2. I am uncertain whether they both would be considered under same control since there is no common ownership by the second entity/LLC. Your thoughts??

From the CRA guide:
Affiliate means any company that controls, is controlled by, or is under common control with another company. The term “control” has the meaning given to that term in 12 U.S.C. 1841(a)(2), and a company is under common control with another company if both companies are directly or indirectly controlled by the same company.

Generally, an institution should rely on the revenues that it considered in making its credit decision when indicating whether a small business or small farm borrower had gross annual revenues of $1 million or less. For example, in the case of affiliated businesses, such as a parent corporation and its subsidiary, if the institution considered the revenues of the entity’s parent or a subsidiary corporation of the parent as well, then the institution would aggregate the revenues of both corporations to determine whether the revenues are $1 million or less. Alternatively, if the institution considered the revenues of only the entity to which the loan is actually extended, the institution should rely solely upon whether gross annual revenues are above or below $1 million for that entity.

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#1978843 - 11/25/14 02:50 AM Re: Gross Annual Revenues to report Moman
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
Why was LLC2 willing to guarantee? What is the consideration if not affiliated?
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1978958 - 11/25/14 04:20 PM Re: Gross Annual Revenues to report Moman
Moman Offline
Platinum Poster
Joined: Jul 2004
Posts: 505
WA
Multiple LLCs per restaurant business. The members of both share 2 in common individuals. More skin in the game was required through underwriting to make LLC#1 lendable.

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#1978970 - 11/25/14 04:31 PM Re: Gross Annual Revenues to report Moman
Kathleen O. Blanchard Offline

10K Club
Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
if the two individuals guarantying, and in LLC 1 and 2, seem that they must have a controlling interest in LLC 2 or why would the others in that LLC guarantee a loan that means nothing to them. If yes, you likely have enough "control" from them to say that these entities are affiliates and will count revenue from each.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1978975 - 11/25/14 04:38 PM Re: Gross Annual Revenues to report Moman
Moman Offline
Platinum Poster
Joined: Jul 2004
Posts: 505
WA
Thank you KB - the individuals that were guaranteeing the start-up LLC also had controlling interest in the second LLC that was also guaranteeing the start-up. This is an unusual situation for us.

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#2042911 - 10/06/15 07:37 PM Re: Gross Annual Revenues to report Moman
Mel in WA Offline
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Joined: Mar 2013
Posts: 1,186
Is it acceptable to only report the GAR of the affiliate to which the loan is made, as long as you are consistent? We have been doing that when a parent company who we have a relationship with establishes an affiliate. I feel like aggregating the two entities if both were "considered in making its credit decision" is muddying the waters. I've preached for years that the credit decision usually has nothing to do with GAR.

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